Due Diligence and Lender Requirements in Dental Practice Deals
25 June 2019 by Leah Groves
The due diligence process is a key stage of selling a dental practice; it is essentially a fact-finding investigation by the Buyer and its professional representatives into the Seller’s practice. As the common law principle “let the buyer beware” stands the onus is on the buyer to find out everything it needs to know about the business before buying it.
The Buyer’s bank will also carry out a due diligence exercise to satisfy themselves that the business is good security for the loan. Often the bank will insist on separate legal representation to do this.
The Seller will be asked to complete a lengthy questionnaire about the business and the property from which it operates and provide supporting documentation. The Buyer and their Solicitor will review the questionnaire replies and the documentation and raise additional enquiries to seek clarification of responses or further detail from the Seller. As such, it is vital for the Seller to co-operate and provide as much detailed information as possible at the outset to avoid it evolving into a long-winded and frustrating process as blank or nonsensical replies will only result in repeated further and additional enquiries.
The key documents requested from the Seller are as follows:-
- Property title deeds and the Lease and evidence of payment of rent and service charge
- Insurance, planning consent for dental use and building work and building regulation approval
- Formal signed accounts for the last two years
- NHS Contract and variations (if there’s NHS patients) and monthly pay/activity statements
- details of any private capitation scheme
- Employment and associate contracts
- Compliance documentation (CQC Registrations, ICO Certificates, asbestos and legionella reports, energy performance certificate)
- Inventory of equipment being sold and equipment maintenance documentation
- Commercial contracts
- Details of any disputes, claims or litigation affecting the Practice
We advise the Seller to begin collating these documents and providing the same to their dental specialist Solicitor when the practice is first put on the open market. This enables the Solicitor to identify and resolve any potential issues and avoids any unnecessary delays with the sale.
As specialist dental Solicitors, Fisher Jones Greenwood use their extensive experience and expertise in this niche sector to help you navigate the due diligence exercise and the whole sale efficiently, call 01206 700113 or [email protected].