Top 5 Legal Tips when Buying a Dental Practice15/05/19
Following our recent insight on selling dental practices, Capsticks’ specialist dental lawyers have put together their top 5 tips for you to consider when buying a dental practice.
Top Tip 1: Engage your professional team early
Engage your professional team at an early stage. Your professional team should be experts in the dental market who deal with dental transactions on a daily basis. A dental purchase is not the same as any other business purchase, as you will have to deal with external bodies such as the CQC and NHS England. Therefore it is important that you instruct dental specialist solicitors who are well versed in dealing with dental practice practices. You should also consider commissioning an independent valuation of the Seller’s practice as although they will have hopefully used a specialist dental valuer to value their practice, it does no harm in ensuring that any value has not been inflated and that the price you are paying is right. At the same time, having a specialising dental accountant will ensure that you consider the financial viability of the practice and the potential for growth.
Top Tip 2: Think about funding from the beginning
In most cases, it is likely that you will need to obtain funding to aid the purchase of the practice. The main banks are still willing and able to lend to dentists and several of them have specialist dental lending teams. You may wish to engage with a financial advisor who can offer independent advice and search for lenders on your behalf. Whichever route you wish to take, make sure you do this at an early stage. Any Seller will want to make sure “you can put your money where your mouth is” and they will want confirmation of an offer of lending in principle. Additionally, having this offer in principle will also help you so you can ascertain what security the lender wants i.e. a charge over the practice, a second charge over your residential home etc.
Top Tip 3: Consider the requirements of the Care Quality Commission
You will need to apply for your CQC registration of the practice (irrelevant of whether you already own another practice that is registered with the CQC). If you are buying a mixed practice (i.e. there is an NHS Contract to transfer), NHS England will want sight or confirmation of a partnership CQC registration. Therefore in this scenario, you and the Seller will need to apply jointly to the CQC. You will both also need up to date DBS checks which have been counter signed by the CQC. Currently, it takes between 4-6 weeks to obtain a DBS check and between 8-10 weeks for the CQC to process an application.
Top Tip 4: Be aware of what Due Diligence you need to undertake
You will want to conduct a full and thorough due diligence exercise of the practice including the NHS Contract, any details relating to underperformance / breach notices, equipment lists, details of suppliers and contracts, all compliance documents for the equipment, employee contracts and associate agreements; accounts for the practice, insurance details, property related documents such as planning permission evidence and EPCs.
Top Tip 5: Make sure that you agree a reasonable Restrictive Covenant
If the Seller is not intending to stay on at the practice after completion as an Associate, it is best practice to ensure that they are restricted from practising as a dentist within a certain radius of the practice or treating any of the practice patients for a specified amount of time after completion. This is to ensure protection of the goodwill that you have bought. Sometimes, lenders require this to be a condition of their loan offer. Whilst the intricacies of the restrictive covenant will be negotiated between the parties during the course of the transaction, it does no harm to include it as a condition of the sale in the Heads of Terms.
Capsticks' Legal Services for Dentists
If you would like to discuss your dental practice purchase then please don’t please don’t hesitate to get in touch with our specialist dental lawyers Puja Solanki and Neha Shah. Learn more about Capsticks' legal services for dentists here.
British Dental Conference and Dentistry Show
We are delighted to be attending the BDA’s Dentistry Show at the NEC on 17-18 May 2019. If you are attending the event and would like to arrange a meeting with us then please contact Puja Solanki. Alternatively, you’ll find us at stand D82 so please feel free to drop by for chat about how we can help you buy a dental practice.