Selling or buying a practice is a major milestone in a dentist’s life – it is the beginning of something new and exciting. But that excitement and momentum can slowly give way to fatigue when there are so many people needing consultation and input (buyer/s, seller/s, landlords, financiers, lawyers, accountants, etc) and administrative and legal processes that need to be signed off on before the exchange.
Each small delay can cumulatively eat away at the momentum and excitement, resulting in deal fatigue setting in, when the parties involved in the negotiations begin to feel frustrated, exhausted and fed up with the process, and begin to have second thoughts as to whether to continue at all. The initial excitement and motivation gives way to apathy, or even animosity.
Deal fatigue is a very real phenomenon (google it) that kills deals, but isn’t well known out in the wider world, because it is usually dressed up in terms like “lack of trust”, “dragging of feet”, ”not serious”, “cold feet”, “a change of heart”, etc.
All parties involved in a deal have a role to play in preventing deal fatigue, and all need to take responsibility for being as ready as possible to deal, in order for things to run seamlessly and in a timely manner through to completion. Any delay can add to cumulative fatigue.
The Vendor
- Have financials ready, including BAS statements, P&Ls, management accounts, balance sheets, depreciation schedules.
- Have all your legal documentation readily accessible, including employment/contractor agreements, premises lease agreements, premises council permits, etc.
- Ensure any documentation for things that need to be transferred is on hand, like ownership of trading names, domain names, hicaps, etc.
- Don’t book a holiday. Any business owner with the end of practice in sight will start thinking about booking a holiday as soon as the deal closes. Please don’t! Deals can take longer than you think, and you may well find yourself with nonrefundable tickets to go away when you are needed for the deal to complete or in order to handle the transition.
- Have a lawyer ready to go (see below).
The Buyer
- Research and form a buying entity. For legal and tax reasons, few people tend to buy businesses in their own names. It is much more common to have a structure (company, trust, etc) set up for this purpose. This can take a week or two to get advice on and set up.
- Research and organise your finance. Plenty of finance companies will say that they will lend you money for this transaction. In my experience, it is much easier to deal with finance companies that regularly lend dental practice purchases. While they will want some information about the practice you are buying, this doesn’t mean that you should wait until an offer’s accepted before you start talking to them. Best to start the discussions early, so that you know who to call and what information they will want from you (like information on your assets and earning potential).
- Have a lawyer ready to go (see below)
- Don’t book a holiday. Many soon to be business owners book themselves a holiday, thinking that this may be the last time they can get away before they are locked to their work. Please don’t book a holiday until exchange (signing) of contracts. Deals can take longer than you think, and you may find that you are away when you are needed for further negotiations or to sign off on amendments.
The Lawyers
- There are a number of agreements that need to be organised in the sale of a dental practice – this can include the sale of the goodwill and assets, the sale or the lease of the premises, and the employment of the vendor post-sale.
- Once you’re ready to proceed, engage a lawyer who is ready, available, and experienced in these kinds of deals, and isn’t going on holiday for the next few months.
- While your deal may be a priority for you, it might not be for your lawyer, who is handling dozens of other cases. The broker’s role is to be a constant reminder of the importance of the deal to both sides’ lawyers, ensuring that they have all the information they need and are talking to each other as frequently as possible, in order to get the deal done in a timely manner.
- It is important to remember that lawyers make their money from protecting their clients, and not from getting deals done. It is unfortunately very rare for a lawyer to approve a contract prepared by another lawyer without changes. It is (again unfortunately) much more common for them to raise how things might play themselves out in extreme circumstances, and ask for some protection that is then looked upon by the other side as an insult to their integrity. No one should be cavalier and care free when spending hundreds of thousands of dollars on a business. Equally, it is important to realise that it is very possible to protect yourself out of a deal, and that in the absence of knowledge of the personalities involved, legal wording has the tendency to come across as harsh.
The Broker
Put simply, the role of the broker in practice sales is to get the deal done. This doesn’t just mean finding the right buyer, price and terms, but also to prevent both parties from experiencing deal fatigue. This is done by:
- Acting as a motivator of sorts, reminding both parties of the bigger picture and not letting them get weighed down with small, unimportant details, so that both sides are still enthusiastic about the deal by the time they settle.
- Acting as a communicator between the parties, to make sure that the personalities of the parties involved and the strength of the deal itself aren’t lost in the legal back and forth.
- Acting as a "squeaky wheel" with lawyers and landlords, as a constant reminder to get the deal done in a timely manner.
- Through preparation of the vendor, buyer and lawyer.
There is a well-known saying that if you have an hour to chop down a tree, you should spend the first half hour sharpening your axe. A similar sentiment can be expressed for all sides of a dental practice transaction. Spending time getting ready is invaluable in the grand scheme of getting a deal done.
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