Due diligence is the process of a buyer investigating the business that they intend to buy.
A buyer who is making a significant investment would be wise to ensure that their acquisition is worth the price that they intend to pay. Such investigations should be varied, involving different aspects, such as viewing the practice and conducting both legal and financial due diligence.
Legal due diligence
Legal due diligence is usually conducted via solicitors.
From a seller’s perspective due diligence can be a tedious task. However, prioritising providing a buyer with a single full set of responses and supporting documents in a timely and orderly fashion cannot be overstated. Incomplete or delayed responses to enquiries is likely to cause delay to any practice sale, and eventually lead to a practice owner needing to spend more time on such paperwork.
Legal due diligence will involve enquiries being raised on:
- Equipment
- Compliance with the Law
- Goodwill
- NHS compliance
- Patients
- Professional obligations of the seller and associates
- Work in progress
- Insurance and claims against the practice
- Employees, associates and other self employed people working within the practice
- Existing expense sharing or partnership agreements
- Commercial contracts of the business
Although this list is lengthy, it is not exhaustive. The actual enquiries that may be raised will depend on the solicitor that represents the buyer, and the buyer’s own specific requirements.
Solicitors for the dentist buying the practice will analyse the replies to the legal due diligence enquiries and prepare a report on issues of concern. Further enquiries may then be raised either relating to issues which have been inadequately addressed or which raise further concerns for the buyer or their bank.
Financial due diligence
Financial due diligence is usually conducted between accountants for the buyer and seller. It will be an investigation into both the accounts and the taxation history of the business being acquired.
Both solicitors and accountants will liaise to ensure that any concerns raised during the due diligence process are adequately addressed in the sale contract to minimise risk to a buyer.
If you are considering buying or selling a dental practice or interested in early discussions before even placing the practice on the market, we can help to expedite the process. Our expert Dental Healthcare team can help to ensure that the enquiries stage of the transaction is smooth and efficient.
