1. Instruct a dental specialist solicitorIt is vital that both the seller and buyer instruct experienced dental specialist solicitors well versed in the nuances of dental practice sales and purchases. This ensures that the deal runs smoothly and all parties’ interests are sufficiently protected, therefore minimising unnecessary delays and costly mistakes.
It is advisable for the seller to get a specialist solicitor on board as early as possible, ideally before the transaction begins, to collate and review the practice paperwork. This will help flush out any potential issues in the sale process at an early stage.
2. Valuation from a dental practice valuerWhether you are the seller or buyer, it pays to take the time to get a formal valuation for an accurate sale price and as evidence of a third party valuation if ever required by HMRC. Ensure that the valuation is compiled by a suitably experienced dental broker who knows the dental acquisition market inside out, even if the sale is to an associate. This ensures that the value can stack up and be verified by the buyer’s bank’s valuation.
3. Practice due diligenceThe seller will need to provide the buyer with relevant information about the practice and it is best to get this information to the legal teams as soon as possible to enable any issues to be resolved early. This includes documents and information such as commercial contracts, equipment inspection certificates and maintenance agreements, up-to date accounts, NHS activity statements and staff contracts.
4. PropertyThe buyer is likely to be obtaining finance for the purchase and the bank will be taking security for the loan over the property from which the practice operates – whether it is freehold or a lease. Accordingly, the seller should ensure that the property title deeds, buildings insurance and planning permissions are to hand to facilitate the change of ownership and that there are no nasty issues lurking in respect of these.
Where the property is occupied under a lease the landlord will need to be involved in order to transfer the lease or grant a new lease direct to the buyer. Also, the term of the lease must be sufficient for the bank’s lending purposes – again your dental specialist solicitor can assist here.
5. Market via dental practice selling agentsBoth sellers and buyers should register with a dental practice selling agent, like Mediestates, who will vet the practice and the buyer so no time is wasted on the wrong match. Let the third party agent take the strain of the negotiation process. Specialist and experienced dental professionals are instrumental in ensuring a successful acquisition that protects your needs.
Practice Location - this practice was set up from squat by the current principal in 2008 and has grown rapidly since opening. Located within a popular seaside town, the practice occupies a converted residential property with ample patient parking. There is high footfall in the surrounding area with excellent transport links.
Type of Practice - this mainly NHS practice has four surgeries occupied by the principal, two associates, one foundation dentist and a part-time hygienist. The outgoing principal was keen to retain the freehold and create a new lease for an incoming buyer.
Financials - the practice completes 21,500 UDAs per annum with an NHS contract value of £540,000. In addition, the practice has a capitation scheme worth £30,000 and generates £120,000 turnover from fee per item work.
Buyer Appetite - despite the rural location buyer appetite was strong, with 865 web views of the practice and 268 general market buyers receiving full sales information. This resulted in multiple viewings and offers for the practice.
Reason for Sale / Incoming Purchaser - the outgoing principal was looking to reduce their managerial responsibilities but was able to retain a clinical presence at the practice postsale. The purchaser was a first-time buyer looking to work within one of the surgeries full time.
Price Achieved - £1,050,000 inclusive of goodwill, equipment, fixtures and fittings. Buyer interest in the practice helped escalate the sale price above the original asking price.
Practice Location - located within the Midlands, this state-of-the-art practice has been operating for over 25 years and under current ownership since 2008. The practice is situated within a small village, close to other amenities and with plentiful parking facilities.
Type of Practice - the practice has three surgeries and offers mainly private dentistry within purpose built premises. The premises are occupied on a leasehold basis with potential for additional surgeries within the premises.
Financials - annual turnover is £250,000, which is made up of a small NHS contract of £19,000 for 750 UDAs, capitation income of £40,000 and £191,000 fee per item income. The practice is efficiently staffed with one full-time dental nurse and one full-time receptionist and generates a good level of profitability.
Buyer Appetite - we marketed the practice to our general market with 906 buyers viewing the practice via our website, 146 buyers receiving detailed sales brochures and eight viewings being carried out.
Reason for Sale / Incoming Purchaser - the principal was selling the practice to pursue other business opportunities and therefore wanted to exit the business immediately on completion of a sale. The incoming buyer had a small portfolio of dental practices and was keen to grow the business quickly as an investment. The transaction took six and a half months from marketing to completion.
Price Achieved - £336,000 inclusive of goodwill, equipment, fixtures and fittings.
Practice Location - established back in the 1950s, the current principal acquired the practice in 2007 as a going concern. It is located close to a main high street within a London borough and benefits from lots of passing trade.
Type of Practice - this is a two-surgery NHS practice with one associate and a part-time hygienist. The leasehold premises are within a converted residential property and provide plenty of expansion space on the first floor, which is not currently utilised.
Financials - the annual turnover is derived from 92% NHS income and 8% fee per item income. The practice has an NHS contract value of £255,000 for 11,000 UDAs, representing a moderate UDA rate. The majority of work is split evenly between the principal and associate with both contributing to UDA completion and fee per item income.
Buyer Appetite - the practice was put out to our General Tier buyers and generated interest quickly with 29 viewings taking place within two weeks of first marketing. Multiple offers for the practice were received from our Priority Tier buyers.
Reason for sale / Incoming Purchaser - the vendor was looking to reduce responsibilities prior to eventual retirement and was open to options regarding a post-sale exit from the business. This suited the incoming buyer who already owned a practice and was purchasing as an investment.
Price Achieved - £590,000 inclusive of goodwill, equipment, fixtures and fittings.