Buying a Dental Practice: Dentist Business Lawyers – What we do greatly

Although medical and dental fields may have some specifications when it comes to business acquisitions, the legal foundation and steps are the same as other business acquisitions.

Stage 1: Letter Of Intent

A letter of intent is a letter that outlines key terms and conditions of the purchase of the dental clinic. It is not the Agreement of Purchase and Sale itself. It is, as explained in our article for the purchase of medical practices, an agreement to agree. It must be drafted by a lawyer because it can be legally binding, which means that it will impose legal obligations on either party and if one party falls short of fulfilling these obligations, they may be sued. Depending on your case, a letter of intent that is treated like a contract, and is signed by both parties, will cause these legal consequences.

The reason why a letter of intent is useful prior to the actual Agreement of Purchase and Sale is that it is a formal way of showing the seller that the purchaser is a serious buyer. At this stage, you could also “lock” the seller into securely agreeing to your terms as the purchaser at an early stage. After the letter of intent, the purchaser conducts due diligence of the prospective dental clinic/practice. Rather than potentially risk having the seller negotiate with another buyer or selling their professional business outright, you can use the letter of intent to hold the seller (in good faith).

Here are the terms that you can address in a letter of intent:

1. Specifying the parties (which is always important – which subsidiary company? what business structure? how many partners? etc.)
2. The object of the purchase (is the purchaser interested in purchasing assets, a professional corporation or something more customized?)
3. The offered price
4. A potential deposit, with terms relating to their return if necessary
5. Terms regarding transitional aspects of the business (dealing with employees, lease renewals etc)
6. Necessary conditions to follow through with what is intended through the letter of intent
7. Is there exclusivity? What is the deadline?

Terms in the letter of intent are by no means exhaustive in the list above. This list is simply an illustration of what is most commonly addressed in these letters. We are expert lawyers who can customize your letter to ensure that it reflects your needs depending on your unique goals and case. You can contact us at 647 806 9184 or contact@ranacharif.ca. Thanks to our experience reviewing and drafting multiple letters of intent in the healthcare industry, we skillfully narrow or broaden the terms to suit your legal needs. We will translate your business concerns and goals to safe legal strategies.

Stage 2: Due Diligence & Agreement of Purchase and Sale of The Dental Clinic

In our experience, it is customary to simultaneously conduct due diligence of the target business and draft the Agreement of Purchase and Sale. For the purposes of explaining the steps we will separate these two aspects below.

Due Diligence of The Target Dental Clinic

If there is any aspect that is a deal-breaker, it would be this one. Due diligence is of great important because it could reveal a lot. Due diligence is mainly two-fold: there is the financial review and the legal review.

The financial due diligence reveals the finances of the target dental practice. Finances should be analyzed to reflect annual revenue, business expenses, payroll, loans…etc.

The legal due diligence reveals legally binding partnerships that the dental clinic is involved in. The reason these are important is because, from a legal perspective, they cause the target dental practice liabilities. Employment contracts could be a source of legal conflict in the near future. Business contracts regarding a lease or business partnerships for equipment or other business needs may also cause legal conflicts down the road. A purchaser MUST know what they are getting into before purchasing the dental clinic. More importantly, the purchaser MUST know the obligations that they will be responsible for.

What can you do with this information? You can reduce liability through your Purchase and Sale Agreement (see below). This is what we specialize in. We use due diligence to restructure your Purchase Agreement. We can remove liability or narrow the scope that affects you. Of course, this will occur as we work together on the transaction. Make sure to contact us at 647 806 9184 or contact@ranacharif.ca to seek legal representation.

Agreement of Purchase and Sale of the Dental Clinic or its Assets

This aspect of the purchase is the main and basic foundation governing the transaction. Whereas the letter of intent could be maximum 3 pages, this Agreement can be nearly hundreds of pages. We can simplify it for you and reduce the number of pages by 30%-50% once we clarify your needs and analyze the target dental practice, depending on the size of the transaction.

This Agreement has very detailed clauses. These are clauses that could be sued upon. Once this Agreement is executed (meaning, signed by both parties), the letter of intent is generally no longer valid. However, it depends of course on the expiry date of the letter which is customizable. Make sure to consult us, if needed, you can reach us by contacting 647 806 9184 or contact@ranacharif.ca

The Agreement is to be signed by both parties (the purchaser and the seller -hence the name of the Agreement being “Agreement of Purchase and Sale”). Prior to signing, it is very common for this Agreement to go back and forth between the purchaser’s lawyer and the lawyer for the seller of the dental clinic with modifications and edits. This is standard. Our goal as your lawyers would be to find common ground and reach a compromise, depending on your needs. We are skilled negotiators who can negotiate a good deal for you while maintaining a healthy business relationship with the seller. It is what we specialize in and do best.

Retain Business Dentist Lawyers for Your Dental Clinic Purchase

As expert business lawyers, we draft, review and advise you on the best clauses to include in your formal legal letters and agreements. We advise you on risks that we identify during your due diligence of the dental practice. Most importantly, we are here to facilitate negotiations for you. It is crucial to retain an experienced business lawyer who handles healthcare acquisitions. We are familiar with aspects of your business that differ from other business acquisitions. Click here to seek legal representation from our firm.