Page 27 - Bulletin Vol 26 No 2 - May - Aug. 2021 - Final

Article | Legal

Essentials Of Buying or Selling A Dental Practice

By Amy Kulb, Esq.
Jacobson Goldberg & Kulb, LLP

Buying or selling a dental practice is never an easy decision. Many of you have spent decades serving the community
and the time has come for you to retire or pursue other opportunities. Or, perhaps you have gained experience and
decided that the time is right to purchase your first practice or to consider the acquisition of an additional practice.
It is essential to have an experienced attorney represent you so they can adequately advise you throughout the
transactional process. Your attorney will also prepare or review the contract for the sale or purchase of the assets of
the practice as well as a contract to purchase the premises or review or prepare a lease and if necessary, prepare a
partnership or employment agreement. All too often, our firm is presented with costly complications or conflicts
arising from a dentist proceeding without counsel of their own. This article will give you a brief overview of the
process and the essentials you must look for in buying or selling a practice.

Often times, dentists wish to buy or sell a practice but do not know how to find a dental practice that is right for
them to acquire, or a buyer for the practice they wish to sell. You can learn of such opportunities from a dental
practice broker. An experienced broker can assist you with finding the aforementioned and also guide you through
the process in several ways. A broker can provide valuation of the practice and explore a general agreement on
terms. If you do not wish to use a broker, many dentists have success in finding a practice or purchaser through
professional ads, dental associations or word of mouth.

Once you find a practice to purchase or a purchaser, but prior to making a final decision on buying or selling, you
must perform due diligence. In this aspect of the transaction, consulting with your accountant is invaluable. If you are
buying a practice, you must review the financials in order to ascertain a fair purchase price and to get a general
economic understanding of how the practice performs. Additionally, you should review and evaluate patient charts
to gauge the patient base and workload. If you are selling your practice, you must review the purchaser’s financial
data to make sure they are a monetarily adequate buyer. The purchaser should also have a solid understanding of
the percentage of billing from insurance plans or Medicaid and then be sure to enroll in these plans to prevent any
interruption in business if they proceed with the acquisition.
The physical premises of the practice are very important as well, and must be considered. When buying a practice,
you will either be purchasing the building in which it is located or leasing the space from a landlord. In the case of
buying the building, it is important to get an accurate appraisal of the real estate. When leasing the premises, your
attorney must review the lease. Key provisions include rent, liability and the term of the lease. When negotiating the
lease, the term is very important, and you might want to add an additional or optional term.
The heart of the transaction is the contract of sale. The agreement will include the basic terms, but also some more
nuanced provisions. Many purchasers receive bank financing. If this is the case, the bank will typically want to
approve certain aspects of the sale, including the lease and the restrictive covenant. Alternatively, some sellers
provide purchase money financing, wherein they take back a note for a portion of the purchase price. If, as a seller,
you are providing such financing, you must make sure the buyer has adequate assets to pay you back. In this case,
there should be a personal guarantee at a bare minimum, supported by secured assets.
A restrictive covenant is an essential provision to discuss with your attorney. A purchaser will require an agreement
from the seller not to practice within a specific geographic area for an agreed upon period of time. This will be
negotiated between the parties, but if challenged, courts require that the terms be reasonably necessary to protect

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