Selling Your Dental Practice
Selling your dental practice is something that most dentists will only do once, and is likely to be one of your most valuable assets. As such it is important to ensure that you get the best price and terms. Having expert advice throughout will avoid you making costly mistakes. PFM Dental are uniquely placed to provide this specialist advice with the valuation, sale and legal work under the one roof.
Dental practices are valued based on a multiple of EBITDA (earnings before interest, tax, depreciation and amortisation). This is the profit of the practice, once relevant adjustments have been made and there are 2 different financial models which should be calculated, being; principal led model and associate led model.
Due to the EBITDA being multiplied to determine the value, it is important to have a dental valuer with their finger on the pulse, who firstly knows what multiples the market is achieving but also how to calculate an accurate EBITDA, making the relevant adjustments. Getting this wrong can cost tens if not hundreds of thousands of pounds in lost value.
As we get a detailed look at how your practice works including the financial information, we will provide recommendations to enhance the value. We can determine any costs that are out of line with market averages and those that affect the profitability of the practice. For example we commonly identify the impact of incorrectly applied hygiene re-charges. The extra profit generated by making a change to this, directly enhances your practice value.
Buyers and Marketing
We offer vendors access to an extensive and vetted list of registered buyers including: individual buyers, major corporates and smaller dental groups. Our hugely popular ‘priority buyers’ scheme ensures that in many cases our agency fee is paid by the buyer – a significant cost saving on your transaction. This is especially effective for larger NHS practices where we regularly attract multiple ‘best and final’ offers.
We have 1000’s of people registered with us, which also includes the major and smaller Body Corporates. However, understanding the buyers and their requirements helps us then identify sale opportunities which would not be found just be doing a mass mailing. For those looking to sell to a Body Corporate it is important to understand the many new, smaller Corporates and dentists who own a dozen or more practices that can provide similar types of offers, but without any of the tie-ins/penalties.
Legal Due Diligence
The process of responding to the Buyer’s enquiries regarding the Practice and Property (known as the due diligence process) is the most frustrating aspect of the sale and can lead to delays. To overcome this our Sales and Legal teams will work with you at the earliest opportunity to guide you through the due diligence and assist with the collation of the documents, assist with data protection issues and help you answer the questions raised by the Buyer’s advisers. Our experience helps to identify the problematic areas and potential “red flags” to a buyer.
Our experience means we know what due diligence requests are reasonable and which are not, allowing a seller to concentrate on the issues at hand.
This will be a key document and will be the subject of much discussion between the respective legal teams. When acting for a seller our attention will focus on the following parts of the Sale Agreement in particular:
Warranties & Indemnities - All buyers will want sellers to give a number of promises and representations about matters within the target practice. Some contractual statements (warranties) are time limited whereas other contractual commitments (indemnities) are not. Our job is to ensure that the warranties and indemnities given to a buyer are fair and reasonable having regard to the individual circumstances that exist within your practice.
NHS Contract - The Sale Agreement will need to provide for a method of transferring the NHS Contract (if applicable) to the incoming buyer which is acceptable to NHS England. The liability for Abatements and Clawbacks will need to be identified and apportioned correctly between buyer and seller.
Defective treatments - A buyer will be keen to have a seller act as a guarantor of the clinical work undertaken in the Practice in the period before Completion. We know what a buyer can (reasonably) obtain from a departing seller in this respect, particularly in terms of how long any guarantees should remain in place post Completion.
Non-compete obligations - Clearly no buyer will want a departing seller to be able to set up a competing practice next door immediately after Completion. However, the range of non-compete requirements required by a buyer needs to be considered carefully particularly if a departing seller wishes to work elsewhere after the sale.
Getting the right applications in at the right time is crucial to the smooth progression of your practice sale. We can assist with the required DBS Checks and advise on the correct CQC applications to match the structure of the sale and purchase taking place in your transaction. We will also work with the CQC during the progress of the applications to keep the applications on track.
Finally it should be noted that our Practice Sales and Dental Legal teams exclusively undertake dental practice work, so both have the required experience and knowledge to ensure your sale proceeds to completion as smoothly as possible.
Martyn Bradshaw is a Director of PFM Dental and heads up the Sales & Valuations team, and has personally been valuing and selling dental practice for over 18 years.
Stephen Knowles heads up PFM Dental Legal. A legal service dedicated to sales and purchases of dental practices.
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