Who are the Pluto Partners?
Pluto Partners is a highly experienced team of dental business advisors. Our Directors have a combined 80 years of expertise in the dental sector. As a client, you will have support from our senior team, including that of Pluto's Clinical Advisor and practising dentist, Dr Pieter Claassen, who has worked both in the corporate and independent fields. Nick Rolph is our Managing Director and holds impressive experience in M&A and Buy & Build projects and Max Bazzucchini, our Director of Sales, is one of the most experienced brokers in the UK, with plenty of tenacity and determination.
Why should I work with Pluto Partners?
It’s important to use a specialist broker that understands dentistry and has access to a vast list of practices.
What makes Pluto Partners unique?
- Access to world-class finance brokers.
- Our unique approach is driven by years of experience in valuing, buying and selling dental practices. We provide ACCA Certified Valuation Report.
- We use a confidential online data room to view information and share this with legal teams once offer is accepted, to speed up the selling process.
- Access to Wealth Management and Wealth Planning and commercial properties management.
- Full Financial Due Diligence report is provided on request.
- We also offer a second opinion valuation for buyers who want to make sure they are paying the right price looking to acquire their practices.
- Our Group valuation and individual practice valuation report is paramount to support business expansion, paired with growth strategy conversation.
- We have an extensive network of practices and groups.
How do we value a Dental Practice?
We thoroughly analyse all the figures and present to the market in the most transparent manner, without making unsustainable assumptions. Through experience we foreshadow potential challenges during deals and through teamwork we overcome them. We can count on the expertise of our clinical advisor and partner being a practising dentist, as well as senior M&A executives. Every practice is unique and every single dental practice has a price range of value, dictated by many factors and many variables.
It is important to look at the last 3-4 years set of accounts as well as the latest and up to date management accounts to see any upward or downward income trend, the surgery percentage of utilisation and opportunity to expand are also factors that can potentially increase value and marketability.
What information do we need from you in order to value a Dental Practice?
Below we summarise some of the key information:
- Last four years accounts
- Fee income (Private/NHS/Mixed/Plan/Specialist)
- NHS performance YTD and for the last four years
- UDA rate
- Size of contract
- Year Established
- Number of surgeries
- Potential for expansion within existing premises
- Percentage of surgeries occupancy
- Associate- led or Principal-led
- Income breakdown by performers
- Understand growth potential
- Percentage of payment for all associates and hygienists/therapists/specialists
- Support team –their position, days or hours worked, pay rate and start date, bonus pay
- Lab and material costs
- Marketing costs
- Computer system
- Details of the property (lease or freehold)
- Age of equipment and chairs
- Latest CQC inspection report and actions
- LAT details
- Advice on CQC application process based on Limited Company or Partnership
- Last twelve months income from Management account
- Plans and reasons for selling
What is the Deferred Consideration of the Sale Price?
The deferred consideration of the agreed dental practice sale price is often driven by the personal goodwill related to the business, i.e. the personal work carried out by the principals, the value related to the personal input of the principals.
The deferred consideration of the agreed sale price is part of the business price kept by the buyers and released over a period of time, once that the agreed terms are achieved, as a way of minimising the risk on the investment and maximising the goodwill protection.
It commonly applies to private and specialist practices, less relevant to NHS or associate led practices but still applicable in certain circumstances.
A frequent deal structure is as follow ; a payment of 75% of the agreed price is agreed to be paid on completion, followed by a payment of 25% of the agreed price over a period of time ( usually between 3-5 years ) subject to terms such as maintaining practice income or sustaining personal income.
When valuing a dental practice we closely analyses the personal goodwill compared to the commercial goodwill of the business, which can drive the price, the terms of the deal and the length of time that a buyer would request a seller to stay in the dental practice post completion, to minimise their risk of investment.
What is EBITDA?
EBITDA is your Earning Before Interest, Tax, Depreciation, and Amortisation.
EBITDA is essentially the true operating profit of the practice ,it’s the number that you see after deducting the running costs from the gross profit. It can vary and it can be adjusted as each business owner could have different costs and different way of running a business. It is commonly used in valuing a dental practice.
What is Due Diligence?
Due diligence is a very important exercise carried out during any dental sales and acquisitions process.
It is divided into legal and financial due diligence. It is an exercise to confirm that all information provided at the time of discussing and agreeing offers is accurate and precise. Information such as accounts,management accounts , patient numbers , staff contracts , NHS contracts and any legal issues such as change of control clauses , lease and property contracts,just to name a few of the documents are usually checked at this stage. An expert legal and financial team will know what to look for in a professional and time effective way.
What is the Earn-Out on the Sale of a Dental Practice?
This is a deal structure when a buyer wish to postpone or defer some of the purchase price when buying the shares or assets of a company, and it is calculated by reference to the performance of the business being bought for a fixed period of time after completion of the purchase. Usually, it is calculated by reference to profits.
What is the difference between Asset and Share sale?
The sale and purchase of a dental practice may involve the purchase of the goodwill and the physical assets of the practice, together with taking an assignment of the leasehold premises from where the practice operates (or acquiring the freehold). This is known as an “asset purchase”.
Alternatively, where the practice is operated by a dental corporate body, the transaction may involve the sale and purchase of the shares in the company that operates the dental practice. This is known as a “share purchase”.
Do I need a Specialist Dental Lawyer?
Never consider the services of a solicitor or a firm with no experience with dental practice sales. It's that simple, but occasionally we have experienced some dental principals going down the route of a solicitor who may be brilliant dealing with selling houses, but could slow down the process of selling your dental practice.
Using an expert dental solicitor will ensure you get the right advice at the right time within budget.
What are the most common legal points when selling a Dental Practice?
There are several issues which regularly crop up when we are dealing with the sale and purchase of dental businesses and companies. Identifying those issues at the outset and rectify them will avoid any potential impact on delaying the timescales of the transaction. The main issue is usually that the lease when is not in the correct name. If it is a share sale then the lease should be in the name of the target company. If it is a business sale then it should be in the name of the sellers.
Other issues related to the lease are:
- Leases which prohibit charging
- Leases which prohibit use as a dental practice
- Leases nearing the end of their term.
With regards to the NHS Contract, aside from the usual under-performance issues there are several points to check in relation to the contract which can cause problems in a transaction, for example;
- The Provider on the NHS contract not being the seller
- The NHS contract isheld by a limited company but NHS England inserted a change of control clauseon incorporation
- The individual shareholders provided a personal guarantee to NHS England when the practice was incorporated and are therefore are ‘on the hook’ indefinitely under the NHS contract.
The main question around the CQC arises when a practice has been incorporated and either the limited company isn’t a registered provider or there is an NHS contract held outside of the company and the providers under that contract aren't registered with the CQC.
How long does the sales process take?
Currently the average timescale for a dental practice sales deal to complete is approximately 6.5 months, 24-28 weeks.
There are many factors, such as the type of practice and the legal and financial support team selected, that can influence the time frame and speedup or slow down the process.
We completed deals in fifteen weeks recently for fully private practices and we completed a large 12-practices group deal in just under seven months.
What do I do after buying my practice?
We like to simplify the process to seven steps:
- Initial enquiry ; The vendor sends the completed data collection form to Pluto Partners and initial discussion with our team takes place.
- Valuation and practice visit ; This is when we confirm the key variables and arrange a visit at the practice and our report is discussed with the vendor(s). Phase one of Pluto Partners marketing process is explained and begins straight after the meeting.
- Viewings ; Phase 2 of Pluto Partners marketing process consists of appointments making with potential buyers already been screened and viewings.
- Offer stage ; We negotiate best financial package and best terms , then Heads of Terms are negotiated and agreed.
- Due diligence ; Key information and documents are reviewed by legal teams.
- On-going Support ; We are there at every step of the way , supporting sellersduring the financial and legal due diligence for a smooth completion.
- Completion ; Sales and transfer of funds to vendors bank account.
Seven benefits of buying a Dental Practice
- Financial stability
- Immediate cash
- Can control patient flow
- Building equity
- Manage and grow professional staff
- You choose your location
- Retirement plans in your hands
Does the Practice need to have a partnership structure?
No, not necessary. A buyer will always consider private limited companies and sole traders. Each one is treated differently from a legal perspective and the way in which NHS England is informed is different depending on whether the vendor decides to sell the practice via assets sale or shares sales.
What type of deal structures are available on the market?
We are experts in the buying and selling process of practices and we will help all clients to structure a deal to suit them.
Each practitioner has specific expectations, tax situations and desires.
Payments usually take the form of upfront transfer on completion for NHS-driven profits, deferred payments for performance- based criteria , earn out for private revenue, and negotiated rates for vendors working at the practice after completion, who may prefer to have a higher on-going salary rather than an upfront payment depending on their individual tax position.
Why do practitioners sell their practices?
Investing in alternative businesses and retirement. The most common reasons for selling are invest in alternative businesses, add to a retirement fund or to gain freedom from all of the administration and regulations of running a practice, allowing the vendor to once again focus on the things they enjoy.
Who is selling and their reasons for selling?
More often than not we come across sellers wishing to take the practice to the next level with a new buyer whilst relinquishing the responsibility of running the practice as they have done this for many years. Having a seller deciding to stay at the practice to help with the transaction time is most valuable for any buyer, especially a young practitioner buying a practice for a long term project.
So, have a good conversation with the seller and explain your idea, as money is not the only driver for a seller.
What if the seller is becoming an associate?
The seller may wish to stay at the practice for a number of years. Make sure you discuss and agree an associate contract with the seller.
Of course, if the seller is not staying at the practice,make sure that there are some restrictive covenants preventing the seller to work near the practice that you have just bought.
A minimum of 2.5 miles in a rural area and 0.5 mile in a city should apply.
What if there is a lease on the property?
If there is a lease on the property and the lease is less than 15 years to the expiry date, it is advisable to talk to the landlord about a potential extension and engage the landlord at early stage. Any buyer would want at least 15 years lease or more if possible and the likelihood is that the landlord would ask for his legal costs to be covered.
What if I wish to buy the Property?
For a vendor the options are either selling the property or have a lease in place with the buyer. The property will be valued as a commercial property and not on a residential basis so this is a point to consider when thinking about buying it or not.
Do I need to have all my certificates ready and available?
During the due diligence process you will be asked to provide and show your certificates such as the GDC registration. Have all those ready and will save you time and during the selling process.
Do I need to ask for an Inventory?
Yes most certainly so, it takes some time and is boring but it will create clarity with regards to the items purchased at the practice and the items that are taking away, also it will avoid any potential arguments and dispute further down the sales process.
What happens to the equipment still leased?
If all or part of your equipment is leased sellers could either transferring the arrangements to the buyer, or paying it off, which is usually most buyers preferred choice.
What are legal warranties?
Most solicitors acting on behalf of their clients as buyers, will advise their client to include in the Standard Purchase Agreement ( SPA ) document, a warrant from you as a seller that all information provided including any financial and contractual aspect of the practice is true and accurate.
On the other hand the seller's solicitors should negotiate and dealing with the warranties in a way that protect the vendor and minimise their risks against potential claims in the future.