Your dental practice is for sale and you are beginning to receive offers from potential buyers. Which criteria should you use to qualify potential buyers? How can you choose the best candidate to take over your practice?
Talk with the Potential Buyers
When selling a business, it is customary to set up a few meetings between parties before beginning to negotiate the terms of a written offer. Asking questions to a potential buyer allows to discover his needs, wants, vision for the practice, and main concerns: what is negotiable and what constitutes a deal breaker. It also allows the seller to pinpoint the buyer’s strong and weak points.
When meeting a potential buyer, it is very important to remain calm and to take your time, as a buyer will always find a way to take advantage of a seller’s nervousness and eagerness to close a deal.
Negotiate the Type of Sale
Selling a dental practice can take the form of a sale of the assets or the shares of a business corporation. It is an important consideration for both parties :
- For the buyer, it is more interesting to buy assets. Such a transaction allows the buyer to amortize the purchased assets and to avoid potential risks tied to the transfer of the ownership of the seller’s business corporation
- For the seller, selling the shares of his business corporation is usually preferable: under certain conditions, the seller may benefit from a capital gain exemption up to
$835 716.
Analyze the Offer
A written offer to purchase lists the assets which the buyer wants to purchase. These are usually:
- The dental equipment
- All furniture and non-dental accessories
- The dental instruments and supplies
- The goodwill
- The leasehold improvements
The offer should also stipulate the price offered and the terms of payment:
- Does the buyer propose to give a deposit?
- Is the price offered reflect the valuation report value?
- Does the potential buyer offer sureties to guarantee a balance of sale, if any? These could be a moveable hypothec on the shares sold, or on the assets, including the accounts receivable and a personal surety from the buyer.
Terms and Conditions of the Offer
The terms and conditions of the offer can be numerous, varied and complex. Please ask your accountant and your lawyer for help in reviewing them.
- Is the offer conditional upon the purchaser getting financing?
- Is the seller bound to stay on after the sale to ensure a smooth transition? Under what terms and conditions? For how long?
- Will all personal guarantees given by the seller be transferred to the buyer as soon as possible?
- Does the potential buyer ask for a penalty for his expenses if the seller changes his mind ad refuses to sell? Under which conditions is the clause applicable?
- Does the buyer ask that a balance of the sale price be held in escrow to warrant the seller’s declarations? What is the amount of such balance of price?
A purchase and sale agreement is a complex document. With the help of a lawyer and an accountant, the selling dentist can qualify the offers to accept the most favourable one and conclude the best transaction possible.