What’s Involved in the Dental Transition Process? Part II

1. Work with your Dental Practice Broker

Choose a broker that represents YOU.  It is important that your broker does only single representation.  A broker cannot fairly represent both parties when each party has different goals, i.e. the seller wanting to realize the most net profit out of the practice and the buyer wanting to purchase the practice with the least amount of investment.

• Marketing the Practice
  • Your broker will manage the marketing of your practice. While many dentists don’t want to publicize the dental practice sale initially, it doesn’t hurt to share the news with your professional network. You may have a fellow study club member who may be interested in purchasing it or know of someone that is looking. The more people aware, the better chances you have to sell it, although if you are not comfortable with sharing your dental transition plans just yet, your broker will handle getting the word out and being sure that a non-disclosure form is signed prior to giving out specifics of the practice.
• Showing to Potential Buyers
  • As your broker is contacted by potential buyers interested in the practice, she or he will check if they are a viable buyer, i.e. have already spoken to a dental practice lender to determine if they are financially able to purchase the practice. Your broker will also have the potential buyer sign a non-disclosure agreement prior to sharing the location of the practice and any financial information about the practice.
• Broker Follow-up
  • Your broker will also continue to follow up with the potential buyers to address any questions or concerns they may have.

2. Complete Your Due Diligence

Be prepared. Interested candidates and their team of advisors will have questions and want to review the reports and tax returns.

• If you are working with a broker, she or he should have all of this information ready to transfer to a potential buyer, either in print or electronically.
• If you are not working with a broker, be one step ahead by having all the information prepared ahead of time. It will simplify the process and prevent any unnecessary delays. It’s also important to be responsive; it shows the buyer and their team that you are organized. Delays can result in the deal falling apart, which is not desired at all.

3. Receive Offers and Negotiating
   • This process starts with a Letter of Intent (LOI) which will have the broad outline of the purchase details. While this is a non-binding agreement, it will be the outline used for the drafting the Asset Purchase Agreement.  Typically the LOI is accompanied by a refundable deposit held in escrow by either an attorney or your broker.
   • Once you receive a Letter of Intent, you and your broker will review the LOI and then decide whether you should accept, counter offer or decline the offer. Reviewing the details of each offer with your team of advisors is important. This phase needs to be thoroughly thought out before making a quick decision.

4. Finalize the paperwork
   • If you have accepted the offer the next step will be for the prospective buyer to meet with their attorney and begin the draft of the Asset Purchase Agreement. This will be a negotiating process between you and your attorney and the buyer and their attorney. During the course of the APA drafting, there will be several other things occurring. The buyer’s attorney will request a copy of your lease and landlord contact information so an ongoing lease can be negotiated. There may an equipment inspection done by the buyer and a rep from a dental equipment company. Other documents that will be needed are the “exhibits” for the settlement:
     • All staff information, i.e. salary, vacation time, sick leave, all benefits
     • Patient credits and A/R balances will be needed at settlement
   • The buyer will be working with their lender throughout this process to get their loan and working capital.
   • It is important to note that your broker should be helping you manage this process as it goes along.
   • Once loan approval is received, and the APA has been agreed upon, a settlement date will be scheduled.
     • The above exhibits list will be needed at settlement.
   • Employment Agreement
     • If you have decided to stay on with the new seller, an employment agreement will be drafted and agreed upon
       • There are many options in terms of amount of days worked, hours worked, and whether you will be an employee or independent contractor

5. Complete the Transition
   • Congratulations, you did it!!! On to the next chapter!!!

To get started on your transition plan today, give us a call at 410-616-2042 or email edorner@nltransitions.com