Your offer has been accepted! What happens next?
After the sale of a dental practice has been agreed, the ensuing Sold Subject to Contract (SSTC) process must be successfully cleared before it is time to pop open the champagne. The transfer of ownership of a dental practice is a series of steps taking around six to nine months. Having an experienced broker at your side will help navigate your way through it all and be as ready as possible for what is in store.
Both sides of the transaction are advised to employ professionals experienced in dental practice sales. This includes specialist dental conveyancing solicitors, brokers and financial lenders who routinely lend for dental practice purchases. They will help you with fact-finding, negotiation, legal hoop-jumping and securing finance.
Next the detailed negotiations begin, and solicitors are instructed by both sides
First things first
A practice is classed as SSTC once an offer has been accepted, and the buyer has signed terms and paid a deposit with their broker. This binds their client – the vendor – to a period of exclusivity and takes the practice off the market.
First priority for the buyer is to obtain ‘indicative terms’ from a lender of the required funds. This is based on the financial circumstances of the buyer and their business plan, and the financials of the practice in question. They may have acquired indicative terms already before making an offer, but it should ideally be in place before solicitors are instructed.
‘Heads of terms’ are drawn up for the vendor, which outline the sale and the headline terms, such as the price agreed, a proposed completion date and topline details regarding the property, staff and business in general. These are then signed by the vendor as a basis on which negotiations can proceed.
Down to the ‘nitty-gritty’
Next, the detailed negotiations begin, and solicitors are instructed by both sides. The buyer formally applies to their chosen lender to get their credit approved, and starts to gather their documentation for their application to the Care Quality Commission (CQC) to take over the running of the practice. Mediestates offers this service free of charge and can help prepare the buyer for interview.
All of the processes involved are detailed and require diligence and care on the part of the professionals employed to facilitate them. This is why we recommend both vendor and buyer to instruct specialist dental solicitors who understand the exact requirements of a dental practice purchase.
Meanwhile, the credit team of the buyer’s chosen lender will carry out credit checks, which can take about a week to come through. Once credit is approved, they will ask the buyer to instruct a chartered surveyor (a surveyor who has been accredited by the Royal Institution of Chartered Surveyors [RICS]) to carry out a ‘business/property if applicable’ valuation, which is an independent valuation of the business and/or property on behalf of the bank. It can take about 10 days for the report to be returned to the credit team, who will go through a process of approving the credit again.
Using a specialist dental practice broker means they can access help with their CQC applications, and we also thoroughly recommend the buyer to approach a lender who routinely lends for dental practice purchases – as their understanding of this type of property often proves invaluable.
Agreeing on the fine print
Once the buyer’s solicitors have completed their due diligence and credit has been approved, they move on to drafting the ‘sale purchase agreement’. This is a document, that sets out every single detail of the transaction, including the information gathered during due diligence and the terms and conditions of the sale. Solicitors on both sides need to agree to all the details in the document, which can take several weeks.
Once this process is underway, the buyer will normally be asked to attend their CQC interview. To pass this, they must know their business plan back to front, along with their responsibilities in running a practice. Usually within a week of the interview, they will receive a ‘comfort letter’, which confirms that the CQC has no objections to them running the premises and that they will await final notification of completion.
To the surprise of many a buyer, once the sale purchase agreement has been agreed, the bank then instructs their own solicitors to review the due diligence, sale purchase agreement and lease, if applicable, at the buyer’s expense. They review the due diligence done by the buyer’s solicitors to be satisfied that the loan will be serviced and paid off in time. Finally, after all of this, the contracts are exchanged.
To the surprise of many a buyer, once the sale purchase agreement has been agreed, the bank then instructs their own solicitors to review the due diligence, sale purchase agreement and lease, if applicable, at the buyer’s expense
The final step
Exchanging contracts and completing the sale often happens on the same day for fully private practices. However, if there is an NHS contract, another month-long process is required for the NHS variation notice. Most NHS contracts are in a sole name and cannot be transferred straight across. Instead, buyer and vendor must go into a partnership. On exchange, they apply for this, then are required to wait for a 30- day notice period. If no objections are raised in that time, then completion can go ahead.
At exchange, the buyer normally pays a deposit of about 10% of the sale value, giving security to both parties that the sale is going ahead. All loose ends are tied up before they complete the sale and the property and/or business changes hands.
The whole process is long and complicated, full of many potential hindrances on both sides. This is where an experienced dental practice broker such as Mediestates can really help to facilitate it. The vendor is our client, but we see it as part of our remit to advise the buyer also on all that will be expected of them, to make everyone aware of what will be required of them and when and to keep communication channels open and positive between all parties.
Working with professionals who deal with the SSTC process every day can make everything run much more smoothly. Surround yourselves with professionals who know the dental practice market and can guide you through every step.