First time buyers – this one is for you

Maybe you did not even realise you wanted to buy a dental practice, but the practice principal is selling and the opportunity is too good to miss. Whatever your circumstances, the purchasing process can be daunting. Starting with the amount of people involved in your transaction. The key thing to remember is, these people are there to make your life easier not harder. This article provides an insight into the process for first time buyers.

1. What can you afford?

Dental practices come in all shapes and sizes, which means the cost can vary. There are plenty of people out there who can assist but be wary of referral fees and make sure the process is transparent. Most sales agents now have finance personnel in house, who can assist you with understanding what you can buy with your current income, assets and deposit.

Warning: check the T&Cs carefully, as you may be liable for the agents fees on completion. You will need to factor this into your budget.

2. Do you have a Dental Specialist Accountant?

As a business owner, your accountant is going to be a key player in ensuring its success and your financial success. The dental sector has certain nuances, particularly where you hold an NHS contract, which will require the expertise of a dental specialist. But the requirements do not stop there, a transaction has a lot of financial aspects to it, including reviewing the financial and tax due diligence, ensuring there are no surprise HMRC bills coming your way, and the transaction documents themselves will contain accounting and tax provisions, which your accountant will need to review and have input on. Therefore, when selecting an accountant, you need to ensure they are happy to provide this service.

3. Selecting the practice for you

Now you are armed with the above, you can do the fun part. Selecting a practice for you. What is available will depend on the market, but there are lots of great dental agents out there that can discuss your options with you.

Think about the property as well, do you want freehold, leasehold?

4. Pick a lawyer (Weightmans)

You have made an offer, and it has been accepted…exciting! You will now be given heads of terms to sign. But before you do, you need to pick a lawyer and ask for their advice on them. Picking a lawyer can be a daunting task, but it really doesn’t have to be. We are a friendly bunch and are there to help you. We will guide you and hopefully simplify the process. One thing you can be assured of is we are here to act in your best interests (this is a regulatory requirement). In our experience, picking someone with dental experience is invaluable. You know your profession has its niche requirements, CQC, GDC, NHS, clawback this list goes on. Here at Weightmans, we have a wealth of experience in the healthcare sector and can guide you through your career from working as an associate to owning your own practice on to retirement and beyond. We are a one stop shop and with over 1400 members of staff, there is always someone on hand to help.

5. Agreeing Heads of Terms and/or Holding Deposit Agreements

Heads of terms and/or Holding Deposit Agreements will scope out the parameters of the deal such as price and other key commercial elements. The idea is that these speed up the negotiation stage later down the line, so the lawyers can focus on the legal elements. It is important to take advice on these documents, especially where there is a holding deposit involved, because you need to understand the circumstances where you may lose your holding deposit.

6. CQC and DBS

To own a dental practice, you need to have a valid CQC registration. Depending on the current and proposed ownership structure, there are different ways to approach, but generally, once the application is submitted, it will take 12-16 weeks for the registration to be approved. If you are buying the shares in a limited company, then the registration will not change, we will just need to submit a statutory notification of change and a registered manager application. Depending on how fast the parties want to complete, this can be dealt with post completion. Please note if there is an NHS contract, and this is outside of the limited company, then you will need a separate CQC registration.

When submitting a CQC application, all applicants must have an enhanced DBS check for adults and children that is 12 months in date. Apply for this early so you do not delay completion.

7. Due Diligence

Once Heads of Terms and/or Holding Deposit Agreements are signed, your lawyers and accountants will conduct a due diligence exercise. This can be a laborious task for all involved but the importance of this stage is paramount. We will delve into the ins and outs of the business, its assets and employees to ensure this corresponds with what you believe are buying.

8. Transactional documents

Whilst some of the lawyers conduct the due diligence stage, the others will begin negotiating the transactional documents,which usually consists of a business purchase agreement (where you are buying the assets and goodwill) or a share purchase agreement (where you are buying the shares of a company) along with ancillary documents. Depending on the structure of the business, there can be a substantial amount of documentation that requires negotiation between the lawyers. We will review and report to you along the way, setting out exactly where we require your instructions. Our aim in this process is to do all the heavy lifting, which means a lot the work takes place behind the scenes. It is important that the negotiation process is done with care and diligence as these are the documents you rely on if the practice is not as it seems following completion.

9. Serving notice on the NHS

If the practice you are purchasing has an NHS contract, that does not sit inside a limited company, to transfer the contract we will need to add you as a partner to the seller’s NHS contract and retire the seller following completion. The NHS contract variation can only come into effect on the 1^st of the month and 28 days’ notice must be given to the NHS. To do so there must be a valid letter from the CQC approving the registration. Serving notice on the NHS can dictate timescales. Your lawyer will have control of this from the outset and will keep you well advised on when they intend to serve notice.

10. Exchange and Completion

Exchange = entering into the formal contract legally binding you to purchase the practice either on a certain day or/and on the satisfaction of conditions in the contract.  

Completion = the date and time you become the legal owner.

Exchange and completion can take place simultaneously and often within the dental world they do. Common reasons for exchange taking place in advance of completion can include:

Asset and goodwill transactions

The reason is to allow the seller to properly consult with the staff and comply with TUPE regulations with the assurance you are proceeding with the purchase. Some sellers are wary or have had their fingers burned and they have informed the staff of the sale and then the buyer has pulled out, leaving the seller with disrupted staff and no legal recourse against the buyer.

Serving notice on the NHS

Being added to the NHS contract before exchange means that you receive the benefit and the burden of the NHS contract from the NHS's point of view. There are ways we can protect you by putting side agreements in place in advance of completion, so we can speed up the process. However, some people prefer the reassurance of an exchange of contracts before notice is served on the NHS.

Internal requirements

Larger companies may require separate sign off by the board for exchange and completion, so they require the events to take place separately.

It is personal to the parties, so this will always vary from deal with deal.

11. You are a practice owner

CONGRATULATIONS it is officially yours! There will be some post completion legal, CQC, NHS and financial matters to deal with, but leave that to us and your accountants. We will deal with most of the requirements.

For you, this is where your journey really begins. You will experience the ups and downs of practice ownership and we will continue to be your sounding board for the rest of your working life and beyond. You will come back to us for Employment and HR advice, restructuring advice, Wills and Probate advice. Whatever and whenever you need, whether it is business or personal, we can provide you with the support you need all under one roof!