Case study

Selling a dental practice to a Body Corporate

Ensuring you don't have to go it alone


Buyer

pays the fee

Fixed fee

legal work

Expert advice

guaranteed

Richard and Jenny had built a large and successful dental practice. Now their thoughts were turning to retirement and the challenge of finding a practical exit strategy from dentistry. We needed to focus on getting the best value for their business and a deal that suited their timescale and requirements. We had vast experience of selling a dental practice to a corporate purchaser. The question was whether this option would be right for their practice and exit plans?

Valuation

The first step was to undertake a formal valuation of the practice. This allowed us to assess the financials of the practice, including taking account of: the NHS contract value, private fee income, staffing (subject to TUPE rules), historic accounting information and an inventory of equipment.

Before going to market we analysed the opportunities to enhance the business value, identified the buyer type likely to pay the highest price and spent time talking Richard and Jenny through the sale process.

Marketing and interest

Due to the scale of the practice we established that Richard and Jenny’s business would be out of reach for many individual buyers. After discussions it was decided that the best advice would be to approach a select number of potential buyers, including the key Body Corporates, a range of smaller corporates and a few carefully chosen individuals. Throughout the process we were careful to ensure that the confidentiality of the practice sale was maintained.

Limited Company - share or asset sale?

Richard and Jenny held their practice within a limited company. It was vital to consult with them and their accountant to determine which method of selling (an asset or share sale) would result in the most tax efficient outcome. They had accumulated undrawn income/cash within the business and as such with a share sale we were able to release the cash subject to entrepreneurs’ relief rather than income tax. This strategy was discussed and agreed before marketing the practice to ensure that we achieved the best solution for Richard and Jenny.

We have used PFM Dental for financial advice over many years and trust them implicitly. So it was a logical step to have a

chat with Martyn and the sales team about our options to sell. He was extremely switched on and we quickly decided to

use PFM to organise the sale. He came to see us after work (for confidentiality), to discuss how best to maximise the value

and in a tax efficient way.

— Richard Stanage, Selling dentist, Lancashire

Dealing with a Body Corporate

Body Corporates, due to the volume of practices they purchase, are hugely experienced buyers. Where PFM Dental act for a client selling to a corporate body our own extensive experience brings a balance into the negotiations. This ensures that our clients get the best deal to suit them and not just what the corporate wants or tries to impose.

In this case, not only did we negotiate on the price but also: the tie-in of the retiring vendors, the amount of retention and the cash being purchased.

As with most Body Corporates, the buyer was signed up to our ‘priority buyer’ scheme meaning that Richard and Jenny’s agency fee was paid by the buyers in full.

In-house legal

Richard and Jenny liked the idea that they could use our in-house legal team - and for a fixed fee. Of course, clients can work with their own solicitors and we are happy to liaise with them.

Working with our in-house legal colleagues makes for an easier process all-round. As usual, we had regular updates with the legal team, so we were always up to date on the sale progress and able to resolve any problems quickly.

Our in-house legal team only acts for dentists selling and buying, including both the business and property matters. Their dental experience ensured that Richard and Jenny got the best advice on technical issues relating to the NHS contract and CQC.

We were impressed with Stephen Knowles’ (dental solicitor) specialist dental legal knowledge at a PFM Dental retirement seminar. He is very logical, knowledgeable and is someone you could easily work with. Likewise we had friends who have provided glowing reports

— Richard Stanage, Seller, Lancashire

Sales progression

As with any dental practice sale, our work is only just beginning when the deal is struck. We regularly monitor the sale, confirm to each party (solicitors and the buyer) what is required and when this needs to be done by. This part of the process should not be underestimated and many hours were spent by us discussing and negotiating smaller points with the buyer.

Fee free sale

Due to the demand for dental practices, PFM Dental have many people registered on our ‘priority buyer’ scheme. These buyers, including most dental Body Corporates, pay the agency fees on behalf of our clients (for transparency we get the buyer to pay the agency fee to you).

This meant that Richard and Jenny benefited from our experience including valuing the practice to result in the best value, enhancements, marketing and negotiations at no cost. In combination with our inhouse legal advice this was a win-win for the client.

Throughout this very stressful process, Martyn was always available by phone and sympathetic to our needs. Anyone who considers undertaking this process on their own would miss out on the skill and knowledge that PFM can provide

— Richard and Jenny Stanage, Sellers, Lancashire

Sales proceeds

Selling a dental practice is likely to release a significant amount of capital even after accounting for tax and costs. To consider the options and ultimately make the right decisions Richard and Jenny turned to John Fearn, one of our Wealth Management Directors and Independent Financial Adviser with PFM Dental’s Chartered Financial Planning division.

John’s experience was valuable in two clear areas. First his technical knowledge of complex issues such as when and how to draw benefits from the NHS pension schemes (1995 and 2015 schemes) and Lifetime Allowance ‘damage limitation’ tactics. Second, extensive experience of managing larger Wealth Management portfolios enabled John to advise on a strategy for generating flexible and tax efficient income and growth, adaptable as Richard and Jenny phased into full retirement.

In practice John helped identify a target monthly net income and then planned how this could be achieved. This provided Richard and Jenny with reassurance that they could afford to retire with a good level of financial security.

PFM Dental advises on larger than average investment portfolios and SIPP pensions. We are careful to ensure that investment and savings options meet with your risk profile and provide a regular review service to ensure your money is exposed to the best possible mix of investment funds. The aim is to tax efficiently outperform cash and inflation over the longer term and we have a proven track record of achieving above ‘benchmark’ returns.

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