Preparing to sell your practice
Once you have made the decision to sell your practice there are a number of practical steps that you can take to help make the whole process run smoothly. Jonathan Tyson of Knights Professional Services explains
For anyone who has embarked on the sale of a practice before, experience will tell you how important such a transaction is and how stressful it can be. As with many things in life, failure to prepare can lead to matters not progressing as well as anticipated.
The first step after deciding on a sale should be to take stock of the status quo at the practice and how everything is dealt with on a practical level.
• Who owns the practice and what is your professional relationship with any other “owners”?
• Are you a traditional partnership? Therefore if you want to sell, are you selling the whole practice or just your proportion of it?
• If you are a partnership or in an expense sharing arrangement, is there any obligation in the documentation that details these relationships, obliging any outgoing person to offer their ‘share’ of the practice to the other remaining parties first before taking it to the open market?
If you are not the sole owner of the practice, it is vital that you discuss your intentions with any other partners or expense sharers in the first instance. By doing this you will ensure you comply with any contractual and legal obligations and could also open up the opportunity to one of your colleagues being the buyer of your proportion of the practice.
Marketing the practice
Selecting a specialist dental practice sales agent is certainly the best advice I can give (unless you are to sell to one of your colleagues and then it may not be strictly necessary).
There are a number of specialists in the market and my advice would be to speak to two or three of them to see who you feel most comfortable with and who you feel will do the best job for you. Any specialist solicitor will be more than happy to assist you in choosing an agent and who the best person to speak to at each organisation is.
Often, the one stage of any transaction that takes longer than anticipated is the seller gathering together all of the information requested by the buyer and their advisers. This is referred to as due diligence and will normally be requested in the form of a lengthy questionnaire from the buyer’s solicitor. The sooner that a seller can put all of this information together the better, and much of this can be done beforehand when preparing for sale.
The sorts of things to start collating include:
• any contracts that have been entered into in relation to the practice such as equipment leases, software agreements, any agreements with employment/human resources advice providers
• accounts of the practice
• a list of equipment at the practice
• staff contracts
• GDC certificates
• all policies and procedures at the practice
• staff handbooks
• practice price lists and brochure
• service/maintenance agreements
• inspection certificates
• planning permissions
• building regulations consents
• CQC paperwork
• energy performance certificate
• asbestos report.
Things to consider:
• Is the practice based in premises that are freehold or leasehold?
• If it is freehold, who owns the freehold? If you own it jointly with anyone else, are they involved in the sale process and are they aware of your plans? If not, they need to be.
• Do you intend to keep the freehold and lease the practice to the buyer?
• If it is leasehold, how long do you have left on the lease? Where is your copy of the lease? Who is the landlord?
It is vital that your solicitor sees a copy of any lease relating to the premises as early in the transaction as possible in order that the landlord can be made contact with in order to gain consent to assign the lease to the buyer.
If the lease has less than 10 years left to run on it then this may affect the ability of a potential buyer to borrow money and use the lease as security. If this is the case then it would be wise to approach the landlord to see if the lease can be extended or whether or not they would be prepared to offer a buyer a new lease.
Many factors will affect the length of the sale and purchase process, but on average transactions are currently taking between six and nine months. Clearly, matters can be concluded swifter than this and can unfortunately take longer. The key message is to be prepared from the outset and this will hopefully ensure the process is as swift as it can be.
By thinking about the elements mentioned above in advance, and by instructing specialist advisers, you can help to take the stress out of the process and hopefully even make it enjoyable. Well, we live in hope!
Jonathan Tyson is partner at Knights Professional Services, which delivers legal and professional services to all businesses. Jonathan specialises in corporate and commercial transactions with a strong emphasis on healthcare and since 2006 has developed a niche in acting for dentists in all aspects of buying, selling, running and/or owning a dental practice.