Buying your first dental practice is likely to be one of the largest investments of your career. Here are the legal, financial and practical questions to consider before making your first purchase.
Buying a practice doesn’t have to be scary! Knowing what to expect from the outset, and having the right advisers around you, can help make the process considerably smoother.
Here are some key questions to bear in mind when considering your first purchase:
How are you buying the practice?
One of the first decisions you will make is how you will purchase the practice. Are you acquiring the practice by way of an asset purchase, meaning you are buying the practice business and its assets, or are you purchasing the shares in the company that owns the practice? The seller’s ownership structure may dictate matters here or they may already have a preferred structure in mind, but it is important to consider what the proposed structure means for you as the buyer. You will also want to consider whether you are purchasing the practice as an individual or through a separate entity, such as a limited company or partnership.
Different structures have varying legal and tax implications, so we would always recommend discussing your options with your legal, financial and tax advisers at an early stage.
What are heads of terms and how are they helpful to me as a buyer?
The heads of terms set out the key commercial terms of the deal. Although they are optional, they are a useful way of making sure that the parties are on the same page about the main terms of the deal at the outset. In particular, we would recommend including a target date for the purchase to complete. You are not bound to this date, but it can be helpful to focus everyone’s minds on a target date for the deal to complete.
Only parts of the heads of terms are legally binding – including confidentiality and exclusivity provisions. Exclusivity is particularly important for you as a buyer, as it prevents the seller from negotiating with other potential buyers, while you are incurring time and costs in progressing the purchase.
Is due diligence really that important?
Absolutely! Due diligence is your opportunity to understand exactly what you are buying and to identify any potential issues before you become legally committed.
As the buyer, due diligence questionnaires (DDQs) will generally be issued by your advisors to the seller, setting out the information and documents required to assess the practice. The DDQs usually request information on the practice’s accounting records, employee and associate agreements, contracts and other important practice documentation. The documents can then be reviewed by your advisers to identify any issues requiring further investigation or protection within the purchase agreement.
The due diligence process is a really important part of managing your liability as a buyer and assessing (and mitigating) any risks identified through the due diligence process.
Don’t be spooked by the process…
There are often several moving parts in a dental purchase and we completely understand how purchasing your first practice can seem daunting, particularly when you are balancing the purchase with your clinical work as well.
Surrounding yourself with advisers who understand the dental sector and involving them at an early stage, can help you navigate the process with confidence and focus on the exciting part: becoming a practice owner!
Contact Lucy at LHennessy@thorntons-law.co.uk or +44 330 236 8647.
This article is sponsored by Thorntons.
