No Need to Fear the Legal Minefield
We’ve discussed before that for many in the industry buying and/or selling their dental practice will be one of, if not the, biggest financial transaction of a lifetime, and what steps can be done to maximise that value. Of course, getting a good valuation is critical, but it means nothing unless it can be realised, and the deal can be done. This is where your lawyer comes in, they play a vital role in the specifics of the transaction.
Appointing a lawyer can fill many people with dread, either because the very need for one in the first place suggests some kind of conflict or adversarial situation requiring legal resolution or, more generally, because the law is complex, not always logical and the consequences of making a wrong or ill-informed decision can be serious. Add to this the costs and it’s easy to see why it can seem a minefield.
Lis Hughes of Frank Taylor & Associates (FTA) argues this need not be the case. “It’s understandable, but all those fears can be allayed with the appointment of a good lawyer. What is important is to understand what good looks like in terms of when it comes to appointing your lawyer.”
“Firstly, specialist knowledge of the sector. You may have a lawyer you have used perfectly well to manage your or your family’s wills, or to undertake conveyancing on a domestic property sale, but that does not mean they have the experience or knowledge of some of the nuances in the dental sector. I’d strongly recommend someone who has successfully completed sales/purchases of dental practices in the past. Of course, your own network may be able to provide a recommendation, but at Frank Taylor & Associates we are also happy to provide you with some guidance. Your lawyer can help structure the deal and protect you with clauses such as guarantees or warranties, and to structure the deal in an appropriate way.”
“Secondly there is an old saying, “you buy cheap, you buy twice”. Cost is obviously an important consideration, but more important is value. Cheapest isn’t necessarily the best. Of course, specialist knowledge of the sector won’t come cheap but in the long run it may save you as you do not need to renegotiate or rewrite contracts after the sale, or find yourself tied in to onerous clauses of which you weren’t fully aware. That said, this isn’t intended to fill potential buyers or sellers with dread at the prospect of the cost. Again, at FTA we can advise you, but the key consideration is value for money and experience, rather than pure cost”.
“Like a residential property sale, the transaction to buy or sell a dental practice can be a protracted process. If a deal collapses part way through, you will have incurred some legal costs for nothing, and be back at square one, naturally this reinforces my earlier point about value for money, but crucially you want to make sure you have a lawyer who is committed and able to see everything through. In many ways you will be looking for the same characteristics in your lawyer as when recruiting staff to certain roles within your practice. Experience – they have done deals before and know how to do them again. Resilience – they will not be demoralised or overwhelmed by every hurdle, but regard them as opportunities not roadblocks. A can-do attitude – keeping the end goal in sight and maintaining that commitment to get the deal done. Commercial – understanding the big picture, and whilst having a keen eye for detail naturally, having the judgment to know what is really important in the grand scheme of things. Personal organisation – being on top of the paperwork and knowing how to navigate the process correctly and ensuring deadlines are met. Lastly and really the aggregation of all the other attributes is teamwork – the lawyer will be part of the team on the transaction, along with you and possibly other practice staff, you’ll all want to be pulling in the same direction”.
Frank Taylor & Associates have a wealth of experience in the market, so if you want more advice please get in touch on 0330 088 1156.
Practice - Greater Manchester
Practice location: This practice is in Greater Manchester and is located within a mix of residential and commercial properties.
Practice type: This is a three surgery mainly NHS practice and is being sold to release the practice owners from the responsibility so they can focus on other interests. The practice has been established for over 90 years and under present ownership for 20 years. The practice is housed in a previously residential property that has been very well maintained. The current principal is retaining the freehold and will create a new 15-year lease within the Landlord and Tenants Act 1954.
Practice financials: The gross fee income from management information for the past 12 months is in the region of £675,000 per annum and the NHS-GDS contract has a UDA rate of just over £30.00 per UDA which generates 94% of the income. The income is generated by the principal working five days a week and five associates working a combined 14 days. The team are supported by three full-time nurses, and three part-time receptionists.
Price achieved: A price of £1,230,000 was achieved which was in line with the asking price.
Agent's comments: This practice has been a fixture in the area for almost a century and is very well established. Over the years there has been substantial growth in the area with several large housing estates and infrastructure now in place. The current owners are acutely aware there is a massive opportunity to develop private dentistry and their decision to sell was the realisation that they did not have the appetite to grow the practice whilst knowing a new owner will have and the incoming principal already has several plans so it will be interesting to revisit the practice in a year to see what changes have taken place.
Number of people looking in the area: 923
Practice - Kent
Practice location: This practice is situated in an attractive village on the outskirts of a major Kent town, giving the benefit of rural living with urban amenities nearby. There are excellent road and rail links, and the area is very much established for commuters enjoying the benefit of living in beautiful countryside.
Practice type: This is a well-established mainly private two surgery practice that is being sold to facilitate the retirement of the existing principal. The practice occupies a rather grand semi-detached property with extensive grounds that include parking for several cars and free on street parking outside. It is being sold with a new 15-year lease being created.
Practice financials: The gross fee income from management information for the past 12 months is in the region of £350,000 per annum with 82% of the income generated from private fees and 18% derived from the NHS contract with a UDA rate of just over £28. The income has been generated by the principal working 4.5 days a week and a hygienist working 2 days, who are supported by two part-time nurses.
Price achieved: A price of £505,000 was achieved which was slightly higher than the asking price.
Agent's comments: After running the practice for several decades this principal is ready to retire and be released from practice ownership, however, he will be staying on post completion for a few months to ensure a smooth transition for the new owner. Like most principals, the biggest driver when looking to sell is finding a buyer who will continue to look after the team and the patients post completion and in this case the seller is very confident it will happen.
Number of people looking in the area: 1,640
Practice - Greater London
Practice location: The practice has been established for over 40 years and is situated in a busy town on the Surrey borders. It benefits from a shop front and is situated in the heart of the centre with efficient road and rail links.
Practice type: This is a three surgery mainly private practice which is being sold to facilitate the retirement of the principal. The practice is based in a two-storey detached premises and has parking for several cars on site.
Practice financials: The gross fee income is in the region of £875,000 and 90% of the income is generated by private fees and 20% from an NHS-GDS with just over £28.00 per UDA. The income is generated by the principal working 3.5 days a week, two part-time associates working five days a week, three specialist associates working a combined 2.5 days a week and two hygienists working a combined 4 days a week. The team are supported by a part-time practice manager, two part-time receptionists and three full-time nurses.
Price achieved: A price of £1,950,000 was achieved which was in excess of the asking price.
Agent's comments: Practices like this continue to rush off the shelves! There is a well-established private income stream for general dentistry alongside specialist work. 20% of the income comes from a NHS contract providing an attractive balance and source of private patients who move away from the NHS when additional treatment is required.
Number of people looking in the area: 3,678
Practice - Yorkshire
Practice location: The practice is based in one of the larger towns in West Yorkshire in a purely residential area and is based within a medical centre with shared parking space.
Practice type: This is a three-surgery, mainly NHS practice and a new 15-year lease is being created.
Practice financials: The gross fee income from management information for the past 12 months is in the region of £500,000 with a UDA rate of just above £29.00 per UDA. The income has been generated by the two associates working a combined eight days a week and one part-time associate. The team are supported by two full-time nurses/receptionists.
Price achieved: A price of £550,000 was achieved and was slightly less than the asking price.
Agent's comments: This practice was being sold as a part of a portfolio review. The incoming owners are already working in the practice so they are aware of the working and as new owners, they have ambition to grow the private income alongside fulfilling the NHS contract.
Number of people looking in the area: 934