Whether you are considering the purchase a dental practice, or perhaps weighing-up a sale of your existing practice, the process of doing so is demanding for all parties given the strict regulatory requirements surrounding NHS contracts, managing the ownership transition, and minimising risk accordingly. Instructing a team of legal professionals as early as possible will be crucial in ensuring a smooth transaction, given the unique factors at play. At JMW, our transaction teams have an abundance of experience in the dental sector and we will be more than happy to have an initial discussion to talk you through the process and get you started.

Due Diligence

As with any acquisition, due diligence will be a vital aspect of the transaction. Buyers will be keen to know precisely what it is that they are intending to purchase, including all risks and liabilities associated with the target practice. For any risk that cannot be avoided, obtaining appropriate legal protection (e.g., warranties, indemnities) will be paramount.

Due diligence enquiries will extend to (inter alia) property matters, equipment, insurance, contracts and employees.

The due diligence process is fairly involved and time consuming in the early part of a transaction, so sellers should seek to respond to the buyer’s enquiries in good time to minimise delays. Sellers who have their documentation (contracts, insurance, certifications etc,.) in order in advance of the due diligence process, will find this process more straightforward, less time-consuming and it should result in fewer follow up enquiries. This should result in a smoother, quicker transaction.

NHS Contracts

Where a practice holds an NHS contract, a buyer will expect to see copies of any NHS contract, to check its validity, establish any restrictions on its transferability and also to obtain up to date schedules in order to ascertain performance level the target practice.

Where a practice is run through a limited company and the transaction is being effected by way of share sale, generally, most contracts held by the company will remain in situ post-sale. Where the company holds an NHS contract, there may however, be a provision prohibiting a change of ownership without the consent of the NHS. Accordingly, it is very important to check the NHS contract for such provisions and engage with the NHS in good time to avoid delay.

CQC

Providing NHS services is a regulated activity, meaning it is a requirement for all providers in England be registered with the CQC. This becomes relevant with the sale and purchase of dental practices as applications to the CQC may be necessary to transfer the existing NHS contract from the seller to the buyer, which is a time-consuming process that should be commenced at the earliest opportunity. Sellers will need to check the status of the CQC registration and attend to any recommendations in their last report, whilst buyers will need to ensure that each applicant has a clear DBS certificate to accompany their application to the CQC.

Associate Services

Dentists seeking to sell their practice may be required to enter into a contract with the buyer to provide associate services post completion. This kind of arrangement is sometimes favoured by buyers to ensure a smooth transition of ownership and help the practice meet financial aims post-transaction. Both seller and buyer should obtain specialist advice on such contracts.

Employees

With a sale of shares, employees contracted with the target practice will remain as employees of the target practice post-sale, as only the ownership of the target is changing hands. It will still be necessary to review the details of each person’s employment contract to ensure these are complied with.  

If a target practice is owned by an individual or partnership and it is the assets being sold, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) will apply. The effect of TUPE is that employees will automatically transfer to the buyer on the same employment terms, unless they opt-out. TUPE cannot be contracted out of or avoided, as both seller and buyer have legal obligations to fulfil, so it is important for both a seller and a buyer to seek specialist advice.