You are looking to sell your practice – it would be great to get the deal done and dusted as quickly as possible, but be careful to ensure you maximise what you get for the business you have worked so hard to build.
A prudent buyer will want you to retain any risk or liability apparent at the time of completion, but this is something that will be negotiated in the sale process.
Valuation
Make sure you get an appropriate valuation from a dental expert. Most of the Dental Agents have very experienced valuers and they are keen to get you the highest value possible.
They will be able to market the practice for you – or they may already have a buyer for you on their books! Consider whether you would be prepared to sell to a corporate (you may have to stay on at the practice for some time to get all of your money) or if you would prefer to sell to an individual and hand up your drill as soon as possible. This will have a huge impact on the value of your practice.
Releasing cash
You may have significant cash reserves tied up in the business, or a significant directors loan balance. We will work closely with your accountant to ensure that you get every penny that is owed to you and that you extract any cash in the most tax-efficient way.
Your accountant will plan for tax efficiency, and we will ensure the sale agreement accurately follows that advice.
Retaining Associates
You and your buyer will want to ensure that your associates continue to deliver services at the practice post-sale. Furthermore, what is to stop a popular associate from opening his own practice down the road, attracting a large number of your patients?
If your practice is incorporated, the associates should in theory be engaged to the company, so the associate’s contract is unaffected by the sale of the shares in the business. The associate would hopefully have agreed to post-termination restrictions anyway, and they will continue to bind the associate.
For individual dentists or those practicing in partnership, the associates are contracted to you (or the partnership) personally, and they cannot simply be transferred to the buyer without the associate’s consent.
There are a couple of options to deal with this, but ultimately they are largely dependent on what the associate wants and whether the associate is happy to stay at the practice under new ownership. Even if the associate was contracted to the company in a share sale, usually we would expect associates to have a 3-month termination notice requirement, so if they really want to leave, they would only have to wait for 3 months.
Every practice is different and every associate is different, speak to your legal team to agree the best way forward.
Preparing for the due diligence exercise
You will be asked to confirm the position of a whole host of matters at your practice, and to provide documentary evidence regarding:
- Your equipment
- The treatments you provide
- Your goodwill
- The practice’s financial position
- Your patients
- Your staff and clinicians
- The practice’s insurance
- Compliance matters
To name but a few!
The more organized you are the less painful this exercise will be. Try to ensure you have everything in place and all your records to hand ahead of the sale. This will be one of the toughest parts of the process for you and it’s heavily dependent on you and your team to provide the information.
If you are missing any contracts – we can create them for you.
Your legal team should be on hand to explain what you do and do not need to provide, and to check that your responses answer the buyer’s questions.
Property
Do you own or lease the premises your practice operates from?
If you do own the property you may be able to sell it to the buyer of the practice. Alternatively you may be able to retain the property as an investment and lease the premises to the new owner on completion of the sale.
For tenants, think about the remaining term of your lease, the buyer’s bank funding may be dependent on a sufficient term remaining. How is your relationship with the landlord? We may need to join the buyer in negotiating an assignment or a new lease for the buyer to coincide with termination of your lease.
We advise that this is considered at an early stage to avoid delays as we near completion.
Investing the Proceeds
Once you have completed your sale you will hopefully receive a large lump sum of cash. Having worked so hard to build up your business over many years it is important that you carefully consider what you will do with the proceeds of your sale.
Seeking investment and estate planning advice before the sale goes through is always advisable.
Speak to Prosperity Law now, we provide a wide variety of related services:
If you require any advice or assistance in relation to the above please contact our Head of Healthcare, Paul Edels at paul@prosperitylaw.com or on 0151 958 0057.
