Kate Beech on dental practice sales: “Deals can be achieved more quickly”
I often to say to clients, whether they are buying or selling, that dental practice acquisitions can take an average of around nine months from instructing lawyers to transaction completion. For some, those nine months can stretch out to over 12 months and when asked why, there tends to be more than one reason.
This could be due to funding, school holidays, taking months to answer any simple enquiries, a landlord who has no interest in the sale or the purchase, the DBS checks taking three months to process, the CQC application submitted late, the property survey highlighting areas of repair that need to be addressed – the list goes on.
However, for those buyers and sellers who are keen to proceed, and will do everything in their control and power to reach completion, then deals can be achieved much more quickly. This requires dedication from both sides of a transaction and a drive to hit a two- to four-month completion date.
There is a caveat and that tends to be for practice acquisitions that require the purchasing dentist to raise finance with a bank. Banks are keen to hit shorter completion timescales, but the very process of raising finance takes time for various reasons.
For instance, a buyer will tend to seek out a number of offers from different banks. Once the buyer has decided on the bank they want go for, they will need to carry out a valuation, which then triggers the bank’s formal offer. In some cases – depending on the purchase price and nature of the practice – the bank will appoint its own independent solicitor.
However, where you have a cash buyer – like many of the corporate dental providers – this isn’t an issue.
Corporate dental providers tend to proceed with a deal from heads of terms being agreed to completion within a much shorter timescale – even more so when the seller is actively involved and the property is owned by that seller. This means that, in effect, there are only two parties involved in the sale and purchase: the buyer and the seller.
On a recent transaction, Goodman Grant acted for Rodericks Dental Limited. From heads of terms to completion, the sale and purchase in this case was carried out in just over two months. How was this possible?
Well, Rodericks Dental Limited have an in-house team that carries out due diligence directly with the seller. This means they are able to collect and collate that information, and make quick decisions on whether there are any issues. They handle the CQC process with the help and guidance of the sellers, ensuring that DBS checks are applied for in good time.
Rodericks Dental Limited also use a template agreement for the purchase of the goodwill (structured the same way for every purchase) and a standard lease for the rental of the property. Rental valuations and schedules of condition of the properties are carried out early in the transaction.
However, no matter how quickly they are able to proceed, it relies on an actively engaged seller who – in this instance – enabled easy and early access to the practice and the property, provided replies and information as quickly as possible, and was able to instruct a specialist dental lawyer in quick time.
Alison Middleton – Head of Legal Services at Rodericks Dental Limited – said: “Once a dental practice owner has made the difficult decision to sell their practice, we aim to make the process as smooth and painless as possible. It makes sense for all parties who are involved in this transaction to reach completion within 12 weeks, if not sooner.
“This is possible for us through our collaboration with Goodman Grant, who understands our aim at Rodericks Dental Limited, as well as the complex legal matters associated with practice acquisitions. We are always delighted to be able to work with Goodman Grant to quickly reach a deal that satisfies all parties involved.”
The key to hitting shorter timescales isn’t just about the lawyers. It is about the parties involved in the sale and the purchase of a dental practice, and being in a position to meet and discuss matters early on. Being actively involved in this process is fundamental.
We’ve all heard of dentists who, when selling their practice, would provide replies to the buyer’s enquires three or four months after they were asked for – often skewed on the photocopier and with a coat of toothpaste down one side. We also know of buyers who don’t apply for the correct DBS check and, as a result, delay a CQC application being submitted. Compare this to the seller who provides an indexed bundle of documents over a weekend.
Deals can be achieved quickly if both seller and buyer are actively involved in reaching that shorter timescale.