Buying or selling a dental practice

A dental practice is bought and sold in much the same way as any other small business, with heads of terms, due diligence, a sale agreement and completion. The difference is in what comes with the practice, as there may be an NHS contract, there will be a CQC registration, the dentists are often self-employed associates and the building is usually leased.

I act on business sales and purchases across a lot of sectors, but I should say that most dental enquiries that come to me are passed to Jonathan Jacobs, a fellow consultant solicitor at Nexa Law who leads Nexa’s dental work and likes working with dentists. I read the enquiry, check it’s one for him and introduce you, and he then runs the deal and quotes for it. Nexa Law Limited is the firm that all of this work is carried out through, and it’s authorised and regulated by the Solicitors Regulation Authority.

The rest of this page explains what the legal work involves, so that you know what to expect whoever acts for you.

Asset purchase or share purchase

Many practices are owned by a dentist personally or by a partnership, and are sold as a business and assets under an asset purchase agreement. Plenty are now run through a limited company, and those are often sold by selling the shares under a share purchase agreement.

On an asset purchase you choose what you take, and the contracts, staff and registrations each have to be moved across. On a share purchase the company carries on as before with a new owner, which is simpler for the contracts but means you take on its history as well, including any liabilities you haven’t been told about. I’ve written a general piece on share sales and asset sales if you’d like more on that choice. The tax consequences are different too, and that’s something for your accountant.

The NHS contract

If the practice has an NHS contract, it’s usually a large part of what you’re paying for, and it doesn’t pass to a buyer just because the practice has been sold. How it gets from seller to buyer depends on the type of contract and on who holds it, and the commissioner has to be involved. The route and its timing should be settled at heads of terms, as it causes delay if they’re only looked at once the legal work is under way.

Due diligence then looks at what the contract requires, whether the practice has been delivering it, and whether money is at risk of being clawed back for under-delivery. NHS dental contract terms have been changing, so the contract needs to be read as it stands at the time of the deal and shouldn’t be assumed from what it said a few years ago.

CQC registration

A buyer needs its own CQC registration in place to carry on the practice from completion (on a share purchase the company is already registered, but there are still changes to notify). The application is the buyer’s to make, and many buyers use a compliance consultant for it. As it isn’t legal work, it isn’t included in the legal fee.

It does affect the legal work though, as it drives the timetable. The sale agreement is commonly made conditional on registration, or exchange and completion are timed around it, so whoever acts for you needs to understand the process well enough to build the deal round it, which both Jonathan and I do.

Associates, staff, equipment and the building

Associates are usually self-employed, working under associate agreements. A buyer will want to see those agreements, to know that the associates intend to stay, and to check what restrictions stop them taking patients to another practice nearby. Employed staff (nurses, hygienists, reception) transfer automatically on an asset purchase under TUPE, with their existing terms and length of service, and there are information and consultation duties on both sides beforehand.

Equipment is often leased or on finance, and those agreements have to be settled or transferred. The premises are normally held on a lease, which needs the landlord’s consent to assign, or a new lease altogether. The property work is done by a Nexa property colleague and is quoted separately.

If you’re selling

If you’re selling, most of the work is answering the buyer’s due diligence questions and negotiating what you promise about the practice. The buyer will ask for warranties covering the NHS contract, patient complaints, regulatory history, staff and the accounts, and for restrictive covenants stopping you practising nearby for a period after completion.

It helps to have the paperwork in order before the practice goes on the market, which means associate agreements signed, the lease located and with enough years left to run, and CQC records up to date. Missing documents don’t usually stop a sale, but they slow it down and give the buyer a reason to reopen the price.

How long it takes and what it costs

A business sale or purchase usually takes two to three months from heads of terms, sometimes longer. With a dental practice it’s the CQC registration, the NHS contract and the landlord that tend to set the pace, more than the sale agreement.

A typical dental sale or purchase is in the region of £5,000 to £12,000 plus VAT, which is an estimate to help you budget. The fee for your deal will be a fixed fee, quoted with a written scope once the details are known and agreed before any work starts. Property work and the CQC application are separate.

Next steps

If you get in touch, let me know whether you’re buying or selling, whether it’s the business or the company, whether there’s an NHS contract, and who owns the building. I’ll then make the introduction to Jonathan, or tell you if it’s a deal I’d take on myself.