Selling your dental practice usually signals the end of an era and the start of a new one, whether it be retirement, a new practice or taking time out to focus on family or other life goals. It certainly isn’t a decision you will have taken lightly. You will have considered all of your options before making the decision, it therefore makes sense to also consider all of your options in the selling process carefully before instructing a lawyer to help to sell your dental practice.
At Goodman Grant Solicitors we have been providing legal services to the dental industry for over 25 years. We work with dentists every day who are looking to sell their practices. A common misconception is that the sale of a dental practice is the same as that of any commercial property. It isn’t enough to just have a good lawyer. If they do not have the experience and knowledge of what is required to handle a sale or purchase of a dental practice, you run the risk of encountering significant problems.
Not following the correct dental specific legal steps can mean a delay completion and possibly higher costs!
For over a quarter of a decade we have worked to develop our expertise in selling dental practices and can offer specialist advice to any practice owner who is thinking about selling.
2. Due Diligence
4. Expense Share Arrangements / Partnerships and Limited Companies
5. NHS, CQC and LAT
6. Property Planning and Permission
8. UDA Levels
9. Honesty and Transparency
10. Your Role as the Seller
11. For a FREE Legal Assessment
The first step to selling a dental practice is getting the right team in place. When you are building your clinical team, you look for those who are best for the job. It should be no different when selling your practice. Don’t settle for anything less than the best. You need a team that has the specialist knowledge to advise you clearly and fully and get the job done.
You will still be running your practice as you begin the selling journey. You may also be planning the next step in your journey, whether that is a change of location or retirement. That is why it is essential to get the right team on board to make the the sales process as straightforward and pain-free as possible.
The Value of Using a Specialist Agency
It may be tempting to cut costs by advertising a practice sale in the dental journals, rather than engaging with a specialist valuer. However, our experience is that although this may attract initial interest, the lack of a professional adviser at this stage will mean that the interested buyers are likely not followed through. A specialist valuer, on the other hand, will have a list of registered buyers ready to proceed. As well as offering legal services we also have a specialist dental agency service headed by one of the most experienced values in the business: Heather Meakin. Call now on 0151 707 0090 for further information.
The Advantages of Using a Specialist Dental Lawyer
A common question we are asked by dentists who have just decided to sell their practice is, why do I need a specialist lawyer?
Our reply is to ask a non-specialist what is meant by a UDA, UOA, PDS contract, GDS contract, BSA, GDC or even BDA, how he will circumvent the terms of clause 12 of the GDS contract (prohibition against selling the benefit of the NHS contract), or what is a Section 295 notice, or what the difference is between a periodontist and an endodontist.
As any dentist in the middle of a practice sale would agree, if you want to transfer your practice and sleep at night, you need to use a specialist lawyer. The complexities of the NHS contract provisions, not to mention CQC and the Dentsits Act, and the ever increasing compliance regulations make it more important than ever to use a solicitor who specialises in the sale and purchase of dental practices.
Gill Hoyle of Cottage Dental Practice used Goodman Grant and explains how having a specialist dental lawyer benefited her during the sale of her practice:
“Many, many thanks to you for your service and advice throughout - whenever needed - especially in helping me to understand the complexities of the deal. We have been most satisfied by the way that you have conducted our sale and fully appreciate your detailed knowledge of a sale to IDH. On behalf of us both I would like to place on record our complete satisfaction with your specialised service."
Where do find a specialist lawyer?
The complexities of dental regulations make it vital to use a solicitor who specialises in the sale of dental practices. A good indication is a member of the National Association of Specialist Dental Accountants and Lawyers (NASDAL) or the Association of Specialist Providers to Dentists (ASPD).
CASE STUDY: How A Specialist Lawyer can Add Value
A recent case that Goodman Grant dealt with is a pertinent example of the extent of the difference the input of a dental specialist can have. The client was selling their dental practice and only instructed Goodman Grant when they were already quite far into the process, which ended up lasting over twelve months. The client turned to Goodman Grant as specific issues had arisen around the NHS Contract being transferred. As it was an orthodontic contract, the LAT needed to agree the transfer. This became a complicated process, one that Goodman Grant were able to help the client navigate. At the eleventh hour, the corporate buyer pulled out of the sale, just as the LAT were about to agree to the transfer.
Although frustrating, this gave Goodman Grant the opportunity to work with the seller to reappraise and remarket the practice. Following on from the implementation of the specialist advice given by the Business Services Team at Goodman Grant, the practice was eventually sold for £500,000 more than the first sale would have been worth.
We understand what selling YOUR dental practice means. Watch Ray Goodman and John Grant’s FREE webinar and learn all you need to know about the sales process:
A buyer’s solicitors will be acting on the premise that you know everything about your business and his client does not. He will ask you questions about your business and want to see paperwork including accounts, maintenance arrangements, compliance licences and certificates, and last but certainly not least, NHS contract performance levels.
Goodman Grant Solicitors supply you with a list of the type of documents you will need to prepare. It is sometimes the case that the buyer’s solicitor, if not experienced in dental work, will not request all these papers (although they should); but at least you will be ready to supply on request.
When can I begin the due diligence process?
Starting to collate the documents that will be needed as soon as you start to consider selling can also give a clearer picture of the current state of the practice. A specialist dental lawyer would be able to advise you on any potential changes that might be made by you prior to starting the sale process, to add value and speed up the eventual transaction.
Goodman Grant produce an easy to follow comprehensive checklist, with separate sections for if you have shares and if you have a freehold or leasehold practice. As an idea of the key documents likely to be requested:
Practice accounts for at least three years
Staffing expenses and contracts of employment
Documentation related to the property including confirmation that the property has planning permission for use as a dental practice
Energy performance certificate and copies of any asbestos survey or report, as well as a Fire Risk Assessment and Legionella risk assessment
The practice CQC registration which includes the original application and all correspondence and certificates
A copy of the practice Health and Safety policy
Data protection registration
An inventory of all fixtures and fittings included in the sale, as well as a list of items not included in the purchase
A list of any equipment on lease agreement, including possible redemption statements
Copies of inspection certificates and maintenance contracts
Copies of all contracts with suppliers
A copy of any NHS contract related to the practice
Details of any breach notices from the NHS
Obviously this isn’t an exhaustive list. By instructing a specialist lawyer you will be in a stronger position at the start of the sale, with all the necessary paperwork ready. This may avoid potential hold-ups, waiting for documentation further into the sale process.
Our blog post “Who Should Handle Due Diligence When Selling a Dental Practice’ will help you understand which parts of the due diligence process you can complete and which are best left to a dental solicitor. Click here to read more
Although both buyer and seller may be eager to proceed quickly, there will also be third parties involved. A buyer is likely to need external funding. Banks are cautious. Not only will the buyer need to agree the terms of his borrowing with a business manager, but the package will need to be approved by the Securities Department of the bank. If your buyer is an associate, he may need to give three months notice to his current principal. The legal work needs to be processed. Then, of course, there is the CQC.
Where possible, Goodman Grant, as a specialist dental lawyer, with a vast experience of the sale of dental practices, ensures the speed of this process. Adam Hawley tells of his experience, where a quick sale was needed:
“The entire process was much quicker than I expected. I had anticipated that it would take about nine months and that it would be a long drawn out process. Fortunately, the bulk of the work was done within a couple of months. There was one hold up that was out of everyone's hands with the NHS, but that just postponed it by a month. By all accounts, the process was done very rapidly. It was great to get it all done and to be able to draw a line under it and move forward.”
It is important to understand, however, that timescales can be longer. On average sales currently take up to eight months from start to completion. At Goodman Grant, we understand this can be frustrating so endeavour to keep you fully informed at every step of the process, giving realistic timescales to each individual client, based on our expert knowledge of the sales process.
EXPENSE SHARE ARRANGEMENTS/PARTNERSHIPS AND LIMITED COMPANIES
In the past decade a large number of dental practices have changed the way they are legally structured, due to requirements of NHS Contracts. This can have an effect on the process needed for sale and for the level of due diligence required.
Expense Share Arrangements/Partnerships
Where you do have such any arrangement, you should check carefully the terms of any provisions relating to the sale of your practice. There may be a clause requiring an offer to your expense sharer/partner in the first instance. Usually, this would be done before marketing the practice, but even if you are not on speaking terms with your expense sharer/partner, you must abide by the terms of your agreement. A specialist dental lawyer will be happy to look at the document and advise as to your obligations.
Not adhering to this can cause problems later on and can even stop a sale.
A recent case that Goodman Grant instructed on involved the sale of a share of a dental practice, where there was an Expense Sharing Agreement in place, which Goodman Grant weren't informed of. The sale got all the way to near completion before it came to light that the seller hadn’t given notice to the other expense sharers of his intention to sell. The Agreement in place stated that they should be offered first refusal. At the point it came to light that this had not been done, the others in the Agreement objected and the sale fell through.
A specialist dental solicitor will need to know of any expense share arrangement or partnership at the start of the process in order to advise you fully.
Getting specific dento-legal advice at the start of the process is vital with limited companies to understand fully how you are selling the business. Selling a limited company will entail having to deal with additional due diligence relating to your limited company.
NHS, CQC AND LAT
Having a specialist dental lawyer will become paramount when it comes to dealing with your NHS Contract and CQC. Understanding who to tell what to when and how can mean the difference between a successful sale and the loss of value in your business. It’s that critical.
That is why you mustn’t leave it to chance. Ensure you have the best advice from people who have the experience and expertise to help you negotiate this legal and legislative minefield.
The NHS Contract
Obtain a signed copy, if you did not receive one when you entered into your contract, and also any variations issued by the PCT / LAT. If your contract is PDS, you may need to approach the LAT to convert to a GDS. However, you should be sure that the LAT do not propose to change the UDA values. They are not permitted to alter the number of UDAs but the likelihood is that the UDA value will be reduced if currently above the average for the area.
It would be prudent to take expert legal advice before approaching the LAT. It may take three months for the LAT to reissue the contract, so bear this in mind when calculating timescales, or planning any travel or relocating.
The negotiation around the NHS contract is another important reason to highlight the need for a specialist dental lawyer. Depending on whether you have a PDS or a GDS contract the way to handle the sale will be entirely different. You need specialist advice to ensure you protect the goodwill of your practice.
Preparing for the Orthodontic Contract Tender: The Dentolegal View
A recent case at Goodman Grant highlighted the complex nature of NHS Contracts and why you need a dento-legal specialist to guide you through the situation. The practice had a four party expense sharing agreement, each with their own individual GDS contract. There was also a PDS Oral Surgery Fixed Term Contract and a small ortho contract that unusually was added onto one of the GDS Contracts rather than being a separate PDS Contract. The Ortho Contract was converted to GDS as it had UDAs and so could be more easily transferred in the sale.
The more difficult issue facing the seller and buyer was the PDS Oral Surgery Fixed Term Contract. After exploring options the seller and buyer agreed to continue with the Oral Surgery element still in the name of the seller, held in trust, with paperwork drawn up to make provisions to transfer the contract in the future where possible. It was not an ideal situation but the sellers and buyers using dento-legal specialists, were able to draw documents that enabled the Oral Surgery Contract to continue but also had safeguards in the event of the contract not being renewed.
Understanding the complexities of dento-legal specifics made this sale possible, where otherwise it may have had to go ahead without the Oral Surgery Contract, at a lesser value to the both the buyer and seller.
Care Quality Commission
When it comes to the CQC (at Goodman Grant we like to think this could also stand for ‘Can’t Quite Comprehend’), many of our clients find it difficult to know where to start.
If you are not yet registered, you need to ascertain the current state of your application and endeavour to complete as soon as possible. A buyer will have to apply for an enhanced CQC countersigned DBS check, which takes several weeks to process. The buyer should also submit his own application for registration at your practice. It is unlikely he will obtain funding until the CQC has provided a letter of comfort which states that it is likely to register the buyer once you have de-registered.
If you have an NHS practice the situation is even more complex and the LAT will not agree to a variation of your contract unless they can see that CQC have confirmed their approval. This is only the start of the process but if you would like to discuss further, please contact us. We have a dedicated CQC team who can take all of this headache away.
Common Issues We See Clients Facing with the CQC:
- DBS Checks - getting one, getting the right one and getting the right one at the right time! The process takes on average four weeks but only lasts for six months. You will also need the correct DBS for your patient groups. At Goodman Grant we are experienced at supporting dentists to get DBS checks.
- When to Apply - the timing of your correspondence with the CQC is crucial. That’s why Goodman Grant advise clients on timescales to avoid any hold-ups or unnecessary extra paperwork or admin.
- Submit the forms too early and they will be rejectected
- Submit the wrong forms and they will be rejected
- Submit the forms incorrectly and they will be rejected
- Submit the forms too late... we think you get the picture
The LAT - (And Why We Say Don’t Speak to Them!)
Do not approach the LAT about your proposal to sell unless you are completely confident that they will not terminate your GDS contact and offer it for tender. We would always advise you speak to a dento-legal professional for advice before making contact with the LAT.
Contacting the LAT without forethought or understanding of the consequences is a common pitfall that dental practices using non-dental specific lawyers can fall into - with potentially disastrous effects, even leading to the GDS Contract being terminated.
PROPERTY. PLANNING AND PERMISSION
Whether you have own freehold or have a leasehold on the property will determine a difference in the work needing to be completed prior to sale. Not completing the correct steps in advance, and failing to have the correct certification in place, can result in delays and additional costs. There a number of common pitfalls facing dental practices without dental specific legal advice during a sale.
If you own the freehold and will be paying off any mortgage on completion, there will be no additional concerns at the start of the sale.
If you have a lease, and there is less than 15 years left, you should be prepared for any buyer to request an extension of the lease is arranged prior to agreeing a sale.
What you will need to do:
Arrange to speak to your landlord to see if there are any issues around an extension. It is unlikely there will be but there is likely be a cost implication to cover the landlord’s legal costs. You may be advised to enter into a new lease at the same time the property is being marketed and this may be sound advice as long as you are happy that your solicitor is experienced and knows how to negotiate a lease of dental premises. If your buyer’s solicitor is not satisfied with the document, it may need to be varied, which will add more to your costs. It is far preferable, if possible, for a new lease to be between the buyer and the landlord.
Certificates and Surveys
You will need to have an Energy Performance Certificate. A local estate agent should be able to arrange this for you. You will probably need to have an asbestos survey (and there are specialist companies who carry out these inspections) and a fire risk assessment (which you may be able to do yourself with the help of a guide you can download).
Did you know that there are statutory regulations which require inspection of all air conditioning systems over 12kW rated output installed in buildings? A buyer’s solicitor may ask you about whether the air conditioning has planning consent. What do you do if you don’t have this consent? The logical answer may appear to be to approach the local authority but that is a common and costly mistake we have seen dentists make.
Planning Consent and Building Regulation Approvals
If you do not have planning permission and building regulation approval for any works that have been carried out to the property, or indeed for its use as a dental surgery, do not approach the local authority. These issues can probably be covered by you providing insurance which might not be possible if you have already alerted the planners.
It is a time consuming task but a detailed list of all the equipment included in the sale will need to be compiled, as well as any specific items that will not be included. At Goodman Grant we provide proforma to help this process to be completed quickly and easily.
If your equipment is leased you may wish to ask the finance company how you go about either transferring the arrangements (if your buyer is willing to take it on) or paying it off, which is what most buyers will require.
You will no doubt have up to date certificates for GDC registration (for you and your qualified staff), professional indemnity insurance, employer’s liability cover, autoclaves, compressors and X-Rays. Have you arranged PAT testing? There is a requirement for portable electrical equipment to be in a safe condition. This does not necessarily require an elaborate system of testing for proof of maintenance. Regular visual inspection of the type of portable electrical equipment in a dental practice will be adequate so long as if damage is found the equipment is removed. You may also be asked to arrange testing for fixed electrical installations where there is no statutory requirement for inspection and test but HSE would expect that such electrical installations should be.
The buyer will look for a deduction in price if you are underperforming on UDA levels. In this instance, upon completion, the difference between the number of units performed and the proportionate number that should have been performed will be deducted from the purchase price.
It’s also important to remember however that overperformance won’t be rewarded in the sale. Keep on target with UDA levels and try to avoid overperforming before a sale, as this may result in completing treatment and work you are not going to be paid.
HONESTY AND TRANSPARENCY
In the event that you have concealed any information from a buyer, you could be sued after the sale for misrepresentation or breach of warranty. That is why we do such thorough due diligence preparation at Goodman Grant. Regardless of whether your buyer asks for all of the documentation you have prepared, and it can often be the case that buyers without a specialist lawyer won’t, you can rest assured you have all the necessary information to hand. Transparency is crucial to us - both as a seller and a buyer. It also speeds up the process, which is beneficial for everyone.
The buyer’s solicitor is likely to request a warranty from you that the information you have provided is true, complete and accurate. The sale and purchase agreements may also include statements from you in support of your comments on the financial state of the business, the equipment, the staff, compliance, and other aspects of your practice. It is important to instruct a solicitor experienced in dealing with such warranties, which should be negotiated so as to minimise the risk to you and include extensive “vendor protection” provisions to protect you from claims as far as possible.
YOUR ROLE AS THE SELLER
At Goodman Grant we understand how precious your time is, running a practice and trying to sell one at the same time is a difficult process. As far as possible we work to minimise the stress and pressure of the sale. Using an experienced dental lawyer like Goodman Grant means you can rest assured that the process will be thorough and expeditious.
You do need to play your part! Drawing on our vast experience in selling dental practices we have created helpful documents and guides to assist you in the process but there are some key pieces of information about your dental practice only you will be able to provide.
For a pain free straightforward sale, we ask you to:
Give us up to date contact information - although the sale can be a slow process, when things do happen they often move quickly. That is why it is vital we can get in touch to update you and check any details. If you’re off on holiday for two weeks, please ensure we know how and when we can best contact you.
Follow Through On What You Agreed To Do - if we ask for information, or for you to complete certain tasks, we ask that you do this by the times agreed. We have an overall plan in place for the work to be completed and your cooperation is vital to avoid delays and additional costs. Read our blog post on additional costs to consider when selling a dental practice
Be Completely Honest - we ask that you give us a full, honest picture at the start of the process, or that you update us as soon as you know of any changes. The sooner we know, the sooner we can advise you and minimise the consequences. If we are working on inaccurate information we cannot provide the best service for you.
Understand that we have a duty to keep whatever you say confidential - except in very special circumstances, any information given to us will be kept confidential.
Respect the time and schedule - some processes take time and we would respectfully ask that you trust that when we have an update we will be in touch.
At times, it can feel like during the sale of a dental practice, your role to play as the seller is limited. This is how it should be, however, because if you instruct a dental specialist lawyer they will have processes in place and will largely just get on with the job!
A word of warning, however, that clients can inadvertently actually play a role in unintentionally sabotaging the sale.
Telling your patients about your plans to sell before you have completed
Speaking to the LAT about your practice sale
Speaking to your staff, unless you are 100% confident they will not start looking for new jobs
Not being honest in your due diligence document
Not having kept your UDA/UOA levels on target
Not having maintained your CQC registrations correctly
Approaching the local authority to find out about retrospective planning permission for any works carried out on the dental practice
Failing to detail all the equipment included in the sale, as well as items that are excluded
Failing to check any expense-share arrangements, partnerships or shareholders agreement
Failing to disclose any restrictive covenants (binding out clauses) governing arrangements with parnerts, expense shares or indeed associates
Taking advice from dental specific lawyers and following this advice each step of the process will help you to avoid these pitfalls and have a successful, pain-free sale.
FOR A FREE LEGAL ASSESSMENT
At Goodman Grant we understand the process of instructing a dental specialist lawyer can be daunting. You want to ensure whoever you instruct understands the unique needs of your dental practice in the context of the current legal, financial and dental climate. We don’t expect it to be a decision you take lightly. That’s why we offer a free legal assessment so we can explain the process more thoroughly and how it specifically relates to your unique situation and so you can ask any questions you may have.
If you’d like to read more of our client success stories, visit our website www.goodmangrant.co.uk/site/about/testimonials