Many excited dental practice purchasers lose focus of the essence of a dental practice acquisition. Typically, the purchasing dentist is acquiring a portfolio of assets. Preservation of the largest asset--the seller's goodwill--sometimes overrides the purchaser's interest in properly inspecting all the other assets. In some instances, this failure can be catastrophic; at the very least it means the purchaser is getting much less than what the purchaser paid for.
There are a few aspects of the dental practice acquisition that need thorough attention. They are:
Rest assured, the seller's broker accounted for all positive attributes associated with the seller's dental practice. The broker also likely assumes that the seller can transfer all assets. Unfortunately, appraisers may not fully account for all negative features associated with the practice (they may not even realize or be aware of them), and further, even in the best of circumstances, sellers cannot transfer all assets as they are currently employed by the dental office.Additionally, careful analysis of the sellers past financial data--including financial statements and tax returns--may indicate systemic problems that do not appear in an appraisal.
Often overlooked in practice transitions are aspects of the transition that are not entirely under the seller's control. Purchasers (or more likely, the purchaser's bank) know to look for liens on the assets. But rarely is there much research into whether there are any rights of first refusal (usually held by a practicing associate), whether associate or management contracts are assignable, and whether all the staff will continue with the purchaser. Finally, there are often restrictions on a seller's ability to transfer certain contracts, especially the lease.
A seller's ability to transfer patients and referral sources seems to be an afterthought for many purchasers. This is a mistake. Since most of the purchase price rests on the transfer of these patients and referral sources, keen attention should be paid to the demographics of the patient pool and referral sources.
Most of the information necessary to make an informed purchase decision can be obtained during the purchase process. Usually the seller will require the purchaser to sign a non-disclosure agreement, which is usually appropriate. Some of the documents/information you should seek are:
