You’ve probably heard of a lot of things when it comes to putting in an offer to buy a practice. Maybe you’ve been told or heard things like:
- “Don’t put in a Letter of Intent. Only full out agreements of purchase and sale will be recommended.”
- “I’ll do a conditional offer for you for free.”
- “You don’t need an appraisal.”
- “It’s very competitive out there.”
- “You’ll need to take the lease as-is.”
- “You’ll need to take the staff as-is.”
- “There are [x] number of active patients”.
And while some of these things may be true (e.g. it’s competitive out there), you need to take everything else with a grain of salt. Who is the person saying these things? What kind of vested interest do they have in the process? Are they the seller’s realtor or accountant? Would it be wise to depend 100% on them without getting your own independent legal advice?
So if someone calls, emails or comes to DMC LLP and mentions these things, we typically respond by saying:
- Letters of Intent are worthwhile. They are relatively inexpensive, set out the key terms in an easy-to-follow format. And realtors have an obligation to show their client all offers (including Letter of Intent offers).
- Letters of Intent and Conditional Agreements of Purchase and Sale are typically condition. Which means the purchaser can back out for a plethora of reasons. Letters of Intent are quicker, easier, and cheaper to draft and negotiate.
- Having someone other than your own lawyer put together a letter of intent or agreement of purchase and sale for you will LIKELY be disastrous for you. Your interests won’t be as promoted and your rights won’t be as protected as if you had a lawyer do these things for you. Don’t be penny wise and pound foolish. Bite the bullet and get a dental law firm to draft these documents for you. Your financial health and well being depend on it!
- You should definitely get an appraisal from a reputable company.
- As per my article in Ontario Dentist Magazine, you need to do a number of things to satisfy yourself that the goodwill you’re paying for remains with you after the sale. First, find out how many active patients there are (i.e. chart audit). Second, make sure the seller agrees to restrictive covenants (i.e. non solicit and non-compete). Third, have the seller stay on to associate for a short period of time afterwards. Fourth, try to have the seller introduce you over time to the patients (e.g. initial letter of introduction, how the phones are answered by staff, changing the signs, having in-person introductions, etc.).
Remember: it’s buyer beware out there! So protect yourself…