The UK dental market is buoyant, worth £7 billion and with underlying long-term growth driven by a number of factors.
As such it is a good time to invest in a practice (or a group of practices) or even to sell your own practice.
Whether you're looking to add to your existing portfolio, deciding whether to take the plunge and set up in business by yourself or hoping to realise the value of your business after years of hard work, ASA Group have compiled this useful guide to highlight some of the key issues you'll need to address.
Get quality advice
Getting a team of trusted advisers on board at the outset of the process is essential when it comes to your negotiating position and ensuring you achieve the best deal possible, whether you are buying or selling.
Buying a dental practice
Whether you're a first-time or novice buyer or an established dental provider who is a seasoned acquirer, buying a dental practice or group of dental practices is a big deal and you will not have taken the decision to do so lightly.
You will want an experienced team to make the process as painless and efficient as possible and to assist you post-acquisition with the integration and practicalities of running a new business.
You will need advice on the following key areas:
- Due diligence: A due diligence questionnaire will help you uncover all the relevant information about the practice you are looking to buy. This will enable you to go into the deal with your eyes open and will allow your advisers to effectively negotiate the terms on which you will buy the practice.
- Sale agreement: You will need advice on the terms of the sale documentation, ensuring you are protected as far as possible should anything go wrong with the business after you have bought it and that there is a smooth transition from seller to buyer.
- Property: You will need advice on the terms on which your dental practice will operate from its premises, including the preparation and negotiation of a lease or property transfer and procuring the necessary consents.
- Associates: It is important to get advice on the terms on which you engage the sellers as associates in future to ensure there is long-term continuity in the business you are acquiring. Your advisers should look at, among other things, restrictive covenants to fully protect your new business and fee retentions to deal with any failed or defective treatment performed by the associate.
- Employment: You will need to know the terms of employment of those engaged in the practice and, if necessary, on the transfer of employees to your business. This will enable you to understand and assess your obligations and financial commitment post-sale.
- Regulatory: As well as the commercial considerations, there will be red tape to deal with, something which you'll no doubt be familiar with. Once you have completed the purchase of your dental practice you’ll need guidance through the process of transferring any GDS and/or PDS contracts as well as the CQC registration and de-registration process.
- Post-transaction assistance: If you are going into partnership, an expense-sharing agreement, which can be put into place on day one, will ensure a smooth start to your new business relationship. Alternatively, if you are a corporate dental acquirer, your integration team might need help with the smooth transition of the practice into your portfolio.
- Identify specific targets: Whether you have a set of criteria in mind for dental practices that you want to target or a specific target in mind, your team should provide a tailored list of targets that fits your acquisition criteria.
- Advising on commercial terms and financing your transaction: There are a number of ways to finance an acquisition. Your advisers should be experienced in raising both debt and equity finance for acquisitions.
- Negotiations: Your team must be highly experienced in negotiating the commercial terms of transactions.
- Process and transactions management: Inertia is one of the main reasons a deal collapses. Your team must keep the transaction moving through the process, managing data flow and dealing with any commercial and financial issues that occur while you continue to run your own business.
Selling a dental practice
If you've already been through the process of buying a dental practice, or have grown your practice as far as you are able to and are now ready to realise the fruits of your labour, you might be considering selling.
While this is an exciting time for you, there is a fair bit of work to be done before you can walk off into the sunset or take more of a back-seat role in the business. Any potential buyer will want to know as much as possible about what they are buying and you will want to get your house in order early so you can present information to them in a sensible and accessible form. You will also want to identify any potential gaps in information (e.g. lack of formal written contracts) or anything that might cause a delay or cause issues for your buyer at the outset of the process.
This is where you need a specialist team to help you, advising you on the following key areas of your deal:
- Finance: You will need assistance and advice on the cancellation or discharge of any loans and security that may be in place over your business before it is sold.
- Due diligence and disclosure: When you receive enquiries from a buyer, you might need help providing responses to these, pulling together the relevant documents and providing these for review by the buyer. You might also need someone to talk you through the process of disclosure (i.e. putting the buyer on notice of certain aspects of the business so they have a complete picture of what liabilities they are taking on).
- Sale agreement: You will need advice on the terms of the sale agreement to ensure your liabilities post-completion are reasonable and as limited in scope as possible. Key areas to consider include the detail and scope of the warranties you'll be providing to the buyer, your financial and administrative obligations post-transaction and the extent of any specific liabilities that you will remain responsible for following completion.
- Property: There are many aspects to consider in the transfer of the property from which your practice is run, including dealing with third party landlords where the property is leasehold.
- Regulatory: There are also regulatory issues to consider on the sale of a practice including the establishment of a partnership route with NHS England, the transfer of any private capitation schemes into the name of the buyer, the transfer of any GDS and/or PDS contracts and the CQC registration and de-registration process.
- Post-transaction assistance: If you aren't yet ready to retire and wish to continue to work in the practice then you’ll need advice on the terms of your associates agreement and any post-termination restrictions.
You will need:
- Advice on process, price, timing and capital structure.
- Advice on the preparation of an information memorandum on the company.
- Assistance in co-ordinating the due diligence process.
- Help identifying and approaching potential acquirers.
- Assistance with management presentations to potential acquirers.
- Assistance with follow-up meetings and discussions to obtain expressions of interest.
- Assistance in the negotiations resulting in an agreed Heads of Terms.
- Assistance in the final closing, including liaising with the client’s other professional advisers, assistance with the negotiation of legal documentation and assistance with managing the completion timetable.
This article was provided by Andrew Barnsley, managing partner at ASA Group and an expert in corporate finance in the healthcare sector and Jon Lawley, who specialises in corporate advice and transactions at ASA Group and contributed to the legal elements of this article.