How to buy a dental practice - a guide

We know thinking about buying a dental practice can feel overwhelming. You probably have a whole host of questions, from practical, financial and legal standpoints. While it may appear to be a complex process, having a clear understanding of all that needs to be considered before an offer is made, and once an offer has been accepted, helps to make the process simpler to navigate.

We want to bring some clarity to this exciting life event so that you're fully prepared for every step, making sure the purchase goes without a hitch.

What are the benefits of buying a dental practice

Buying a dental practice rather than starting up a squat practice, certainly has some benefits, as you're purchasing an existing business with an already established operational infrastructure.

Advantages include:

• Proven business model: you inherit a practice that is already up-and-running, with patients, staff, processes, CQC compliance basis and local brand reputation.

• Established patient base: an existing book of patients means revenue from day one.

• Cost predictability: you know exactly what your overheads are going to be, and can negotiate based on actual financial performance.

• Growth opportunities: even well-run practices have room for improvement. There may be scope to update systems, utilise surgery hours to their full potential, expand the range of services offered, refresh branding and improve efficiencies.

• Greater financing opportunities: lenders often prefer to finance acquisitions over squat practices, due to reduced risk and proven cash flow.

• Asset appreciation: your investment in improving the business will increase the value of the practice, bringing greater personal wealth gains in the long run.

Can anyone buy a dental practice?

The ownership of dental practices in the UK is regulated by both the General Dental Council (GDC) and the CQC.

As such, only registered dental professionals such as dentists or orthodontists can be dental practice owners. This is to ensure that those managing the practice have the necessary clinical expertise to safely and effectively run a practice, so that patients are fully protected.

If you intend to purchase the business through a limited company, at least 50% of directors have to be registered with the GDC. You must also be cautious as to what name you give your company, as there are restrictions on certain words which can be used in a company name that offers dental or orthodontic services. 

What to know before buying a dental practice

Buying a dental practice is much more than just a clinical decision; it's a long-term business and life decision that can offer financial security and emotional fulfilment to you and your family.

However, it's important to note that practice ownership means you'll be taking on all the leadership responsibilities, including the management of the whole team, HR, compliance and business administration, as well as patient care.

Things to consider when looking for the right practice include:

• Location: is there a steady flow of patients? What's the local competition like?

• Culture and philosophy: does the treatment approach align with yours? Is it patient-focused?

• Accessibility: can people park easily? Is it close to public transport? How visible is it?

• Business plan: do you have a clear vision for how you'll make the practice a success? As part of a business plan, you'll need to have clear financial projections and an operational strategy.

How to buy a dental practice - a step-by-step guide

Once you've found the right dental practice and you're ready to make an offer on the asking price, we'd strongly recommend obtaining professional advice from a team of advisers, such as dental specialist lawyers like ourselves, compliance advisers, financial advisers, property surveyors and accountants who can guide you through the different elements of the buying process.

Let's take a look at the key steps that should be followed to ensure a smooth practice purchase.

Due-diligence process

You wouldn't make any major purchase without thoroughly checking what you're buying, and this is exactly what the due diligence process is for.

On your behalf, a dental specialist solicitor will need to gather detailed information about the practice you're looking to buy, and raise any issues or queries with you, as well as advise on the best way forward to mitigate your risk of inheriting any practice liabilities as much as possible.

By thoroughly reviewing every aspect of the practice, specialist dental solicitors can help to identify any potential liabilities, historic issues and possible ongoing risks, so that potential buyers can make an informed decision and mitigate their liability from completion onwards.

This includes:

• NHS and Capitation Scheme performance and underperformance – importantly how to mitigate the risk of historic underperformance before purchase.

• Title, covenants and other legal elements of the property, whether leasehold or freehold. 

• Supplier and referral contracts, including all practice arrangements and obligations. 

• FCA, ICO, CQC and other regulatory compliance and registrations.

• Equipment, fixtures and fittings and other business assets suitability and compliance. 

• Employee and staff documentation, issues and reviews.

• Business structures, constitutional agreements and ongoing business management.

At this stage, it's also worth spending some time at the practice, shadowing the dentists there to get an idea of the standard of work that is being undertaken – you wouldn't want to risk inheriting poor patient records.

Share sale or Asset sale?

Be clear on what's being sold to you. The type of transaction should be detailed within the sales prospectus as each structure comes with differing legal, tax and operational consequences for both seller and buyer. It's important to clarify this with the sales agent if you're unsure and also take advice from your accountants.

In an asset sale, usually where the seller trades as a sole trader or partnership, you are purchasing specific assets of the practice, but not the entire legal entity. In this instance, you would acquire things like practice equipment, furniture, practice contracts (including transfer of the NHS Contract if applicable) and patient records, but you do not acquire any existing liabilities. 

The employees will transfer over to you under TUPE regulations and you will appear to continue to trade under the business name, however a new business entity has been created.

In a share sale, where the seller trades as a limited company, the buyer purchases 100% of the shares of the legal entity, meaning you acquire all assets and liabilities, all contracts, licenses and employment agreements. 

The business entity will not change, i.e. the limited company, but the owner of that business entity has changed. Where a share sale is applicable, there is generally more risk to a buyer, as they inherit the company’s liabilities, and so additional due diligence and transactional documentation is required.

Before Contract

You've had your offer accepted – so, what happens next?

As soon as it's accepted, both seller and purchaser will need to sign a 'Heads of Terms' document which outlines the deal value and structure. It is beneficial to have these Heads of Terms checked by your dental specialist solicitor. We will know what is usual and standard for a dental transaction – we will be able to identify any unusual elements or unfavourable terms to be negotiated before you commit to the purchase. 

It's also time to think about making your CQC (Care Quality commission) application, as this can take up to 12 weeks to process, not including any time required to obtain valid DBS certificates.

Find out whether there is an existing NHS contract and what format this is in. It is likely that it will be a GDS (General Dental Services) contract, but it may be PDS (Personal Dental Services) contract.

The transfer of NHS contracts is notoriously complex and tricky, and is where an experienced dental solicitor (like a member of our dental team) is worth their weight in gold, as they will help you navigate this process.

Essentially, rather than 'selling' the NHS contract to you, you will form a partnership with the seller, and once the sale is complete and the CQC have approved the retirement of the seller from the business, we then apply to the NHS to retire the seller from the contract, leaving you as the sole contract owner. 

In some cases, where a share sale is involved, the NHS contract may already be in the name of the limited company. This is not always the case however and so it is important that your dental specialist solicitor checks the position early on in the transaction, to avoid any delays in obtaining an additional CQC approval.

Contract negotiations

Drafting the Sale and Purchase Agreement (SPA) is the next step once all of the enquiries have been made.

This legally binding document is drawn up by the buyer's solicitor, and sets out exactly what is being bought and for how much, as well as each party's obligations and liabilities. The SPA is a key document designed to cover anything that might have arisen from the due diligence activity, for example, certain protections may be needed such as warranties and indemnities.

Key things the Sale and Purchase Agreement will cover:

• Purchase price and payment schedule;

• A clear definition of which assets are being purchased;

• Any liabilities that are being transferred to the buyer and expressly setting out which liabilities are not being acquired by the buyer;

• Any restrictive covenants or clauses that may prevent the seller from competing with the practice after the sale;

• Specifics of the NHS contract (where applicable) and CQC registration;

• How defective treatment carried out before completion will be dealt with;

• Contingencies to allow the sale to proceed;

• Completion date.

Exchange and completion

Once all due diligence activities are complete and the CQC application has been approved, each party can swap signed and dated SPAs, which is the exchange process.

At this point, the completion date is set, and your solicitor will be able to contact the Local Area Team (LAT) to request that the name is changed on the NHS contract, if applicable. Note that at this stage, the seller's name will still need to be kept on the contract.

If the practice does have an NHS Contract, The ICB has 28 days in which to consider and amend the contract, in which time you can progress with TUPE obligations, which is the (Transfer of Undertakings) Protection of Employment Regulations 2016.

Completion can take place once the LAT has confirmed that the NHS contract has been transferred.

In some cases, most likely where there is no NHS contract, or you are purchasing a limited company, we will exchange and complete simultaneously.

FAQs

How do you evaluate the value of a dental practice

The value of a dental practice depends on both financial and non-financial factors. For example, analysis of annual turnover and net profit margins are a good indication but would need to be viewed alongside practice characteristics, such as whether the practice is private, NHS or mixed, number of patients on practice register and patient (and staff) retention rates.

Is the dental market strong in the UK

The UK dental market is generally strong, with a growing demand for treatment in both urban and rural areas. The dental industry is seeing a boom in cosmetic procedures thanks to a greater overall awareness in health and wellbeing, and with an aging population, oral health treatment is widely needed.

Mintel forecasts a growth within the UK dental market of nearly 20% between 2024 and 2029, with the private sector growing faster than NHS dentistry.

Can a non-dentist own a dental practice in the UK?

No, dental practice owners must be dental professionals such as dentists or orthodontists.

Can a dental hygienist own a dental practice in the UK?

Yes. Guidance from the General Dental Council states: A DCP (dental care professional) seeking to open a DCP-only practice must work within the limits imposed by current legislation and regulations.

How long does the purchase of a dental practice take?

The average timescale for a dental practice sale to complete is approximately five to six months. This is very much dependent on submitting the correct CQC application in a timely manner and securing your lending offer in good time.

Need legal help buying a dental practice?

We hope that this article has provided some guidance and information in the steps needed to purchase a dental practice. It may seem daunting but with professional help from a specialist dental solicitor, your purchase will be smooth, while also ensuring that nothing's missed.

Our team of solicitors are experienced and knowledgeable, and will guide you throughout the process. If you're looking for a dental practice to buy, contact us today so we can be on-hand from the very start of the process.