Due Diligence: A Vendor’s Perspective: Dental Town

A guide to due diligence – a vendor’s perspective

 You’ve chosen to sell your dental practice, which is a big step, but are you prepared for the potential pitfalls that you might encounter along the way? Indeed, just like when you bought your business, there are a number of major considerations you need to take into account – including due diligence.

In case you’ve successfully managed to erase all memories of due diligence since you purchased your practice (and we wouldn’t blame you if you had), the process is comprised of a comprehensive appraisal undertaken by a prospective buyer and their legal team to establish a practice’s assets, liabilities and risks to evaluate its commercial potential. This time round, as a vendor, this means you will have to prepare all the information that the buyer requires about both your business and the property (or lease if you are just selling the business). As you can imagine, the buyer will want to find out as much as they can about the practice they’re taking on (considerably more than they did 15 years ago!), not only to confirm its suitability, but to establish if there are any issues that need to be rectified before the purchase is legalised.

During the due diligence procedure – also referred to as DD or ‘pre-contract enquiries’ – an honest, open approach and forthcoming attitude can help move the process along, helping to reassure the buyer along the way. An attempt to conceal key information, on the other hand, would be detrimental to the sale, especially if the buyer were to take legal action in the form of a breach of warranty claim or claim of misrepresentation. In any event if you disclose the information to your specialist dental solicitor in the first instance they can advise you on whether the fact needs to be disclosed.

So what does DD entail? As a vendor, you are required to provide a number of key documents. In regards to the property, you’ll need to collate all of your building regulation documentation, asbestos reports and energy performance certificates, as well as proof that the property can be used as a dental practice.

The buyer’s legal team will also need all of your regulatory inspection certificates, copies of policies and procedures and evidence of CQC and HTM 01-05 compliance. This will include proof of CQC registration – including all correspondence, certificates and original application – inspection reports and action plans. If you have an NHS contract, your current and previous UDA targets will be taken into consideration too, as will any employment contracts, share agreements and partnership deeds (if applicable, of course).

On top of this, you’ll need to provide a detailed inventory of all fixtures, fittings and equipment that you plan to include in the sale of the practice along with a list of items (if any) that are currently being leased. All test certificates and maintenance contracts will need to be included too. Other than that, take the time to collect together information about staff vaccinations, GDC registration certificates, details about PAYE and NI, and an up to date list of patients and suppliers.

And because no stone is left unturned during due diligence, you will need to provide three years’ worth of accounts to the buyer’s legal team so that they can examine the sustainability of the financial performance of your practice.

On paper, it sounds moderately straightforward doesn’t it? After all, what could possibly go wrong with a little bit of filing? In my experience, the answer is a lot, particularly if you’re unprepared and uninformed. Looking at the list of what’s required it’s easy to underestimate the amount of time it will take to collect everything together, but unless you’re extra organised and everything is where it should be, you might find yourself scrabbling to find where you put it. Worse still, if a document has been misplaced or is out of date, you risk causing unnecessary delays while you rectify the issue. If you can, then, allocate some time before you market your practice to compile all of your information – it could save you precious time later on down the line.

It’s also important to choose your solicitor or lawyer carefully, as inexperience in the dental sector can result in severe delays. For the best results, Dental Elite recommends working with a specialist dental company. With the right skills and practical knowledge of how to approach DD efficiently and effectively, a dental legal firm is your best chance of coming out the other side successfully and stress free in a timely manner.

Selling your dental practice is a huge milestone in your professional career – don’t be foiled by due diligence.

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