As you move forward with the purchase and sale of an existing dental practice you want to establish a timeline and try to keep on track as much as possible.
- Letter of Intent – The Letter of Intent (“LOI”) should set a closing date as well as a starting point when both parties sign the LOI. Upon all parties agreeing on the LOI terms, when they sign the LOI it starts the clock to work towards the closing of the dental practices.
- Due Diligence – As soon as the LOI is signed, the selling dentist should be prepared to provide the documentation needed for the purchasing dentists to review and complete their due diligence to ensure they are acceptable to completing the deal.
- Document Preparation – While the due diligence is proceeding forward, the legal team for the parties should begin drafting the full set of documents that will be needed to properly close the transaction. Most of the time there will be a decent amount of documentation so it should take around one or two weeks to make sure the initial drafts are complete and thorough.
- Sit Down – Once the buying dentist feels as if they have a good handle on the due diligence and while the documents are being prepared, the buying and selling dentist should sit down at the office and give the buying dentist a feel for the actual practice, not just what is shown on paper during the due diligence. This should not necessarily be when the dentist meets or is introduced to the staff and any associate dentists but should be a starting point to begin that process and let the selling dentist give a lay of the land for the office and provide the purchasing dentist a good look at the actual office and give the opportunity to ask operational questions.
- Document Review – Once the initial drafts of the practice transaction documents are prepared, both the selling and the buying dentist should go through the documents and make notes for any questions or concerns that they want to address. There should be a decent amount of legalese and boilerplate provision in the documents and the parties should bring their questions and concerns to the party providing legal advice for them. This is where all parties flush out the remaining items that may not have fully been thought of in the Letter of Intent or addressed before hand.
- Document Finalization – Once the document review is over and all parties are comfortable with all of the terms, provisions and documents that will complete the transaction, the legal team will finalize the documents to account for any and all issues and have a final set of documents that will only need to be signed by the parties. The documents can be signed digitally for the most part, unless there are requirements such as notarization or the need for a “wet” signature from a lender.
- Closing Day – Many times the dental practice transition documents will be finalized before the closing day and can even be signed before the closing day. This helps both the selling and purchasing dentist concentrate on the actual transition of the office and staff so that the purchasing dentist does not miss a beat the day the transition takes place. Many times you want to the closing day to be a Friday so that the purchaser has a the weekend to get comfortable before starting to see patients. When the documents are signed before the closing day, the legal team for the parties will keep the signed documents in escrow and the closing will not be fully complete until the money is wired to the selling dentist. While the fully executed documents are very important, if the money doesn’t change hands the transaction is not complete.
The Lender – The wild card in all of this is if the purchasing dentist is using a lender to purchase the practice and not purchasing in cash as is the case most of the time. The parties can desire to close within 30 days of the LOI but it will be up to the purchaser’s lender as to if that timeline can happen. Just like taking a mortgage out on a house, when you are borrowing money the lender will have their requirements and timelines and they will have to be followed before they agree to fund the transaction. The purchaser wants to make sure they use a lender that is familiar with dental office purchase as it will make things go much smoother for all parties. The lender should be able to provide a tentative timeline/closing date that they think would allow for the transaction to be completed.