Due diligence when selling a dental practice
20 March 2018 by Lucinda Stacey
Selling a dental practice is always a lengthy process and a large reason for this is the time-consuming due diligence exercise which must be undertaken. This is the process in which a buyer will investigate the financial, commercial and property aspects of a business in order to decide whether to go ahead with the purchase. So what can you do as a seller in order to streamline the due diligence process and ensure your sale progresses swiftly?
The first step
Start collating all documents relating to the practice as soon as possible. Prospective buyers are going to want to see the inner workings of the practice in as much detail as possible in order to identify any potential risks or liabilities. Being able to provide a comprehensive due diligence package at the start of the transaction will therefore go a long way to speeding up this process.
What documents do you need to provide?
As a general rule, the more information you can provide, the more comfortable a buyer will be. Firstly, a buyer will want to see a copy of the NHS contract together with recent pay & activity statements and vital signs reports. This will show the buyer the value of the contract and give an indication as to whether there is likely to be an underperformance of UDAs.
They will also want to be provided with a list of all dental equipment that is included in the sale of the practice. Up-to-date inspection reports for all pieces of equipment will also need to be provided to reassure the buyer that they will not need to incur any expense in respect of their upkeep in the short term. Additionally, any contracts for the maintenance of equipment or with suppliers generally will need to be supplied.
The property side of matters
The buyer will be entitled to ask for a fire risk assessment, energy performance certificate, asbestos report, a copy of the buildings insurance policy and any relevant planning permissions to ensure that the property complies with various legal requirements.
Obviously this is not a comprehensive list and items such as the following have not been mentioned:
- Staff contracts
- Vaccination histories
- Utilities invoices
- Hire purchase agreements
However, it ought to be clear that the due diligence process is a daunting one for both buyer and seller alike.
Nevertheless, engaging with the process from an early stage will not only make collating the documents more manageable but will also reduce the number of additional enquiries raised by a buyer when the due diligence package is reviewed.
If you have any queries in relation to the due diligence process or require any assistance in respect of dental transactions generally, please contact our healthcare team on 01206 700113 or [email protected]
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