Why You Always Need a Purchase & Sales Agreement When Buying a Dental Practice

When it comes to buying a dental practice, everyone wants the deal to close as quickly as possible. Whether you’re the seller or the buyer both parties would like a smooth transition. A common phrase in business circles is time kills deals. Something that often gets overlooked is putting together a proper purchase and sales agreement.

After the negotiating conversations, buyers and sellers simply don’t have the energy or ability to parse out another complicated document. Buyers typically construct a Letter of Intent just to get to the negotiating table. Then there are negotiations.  Then at the end of a deal a legally binding document must be created where both parties are happy and in agreement. In reality, this is one of the most important things you can utilize as a buyer to hedge protections that you deserve in good faith.

How a Purchase & Sales Agreement Protects You

In essence, a purchase and sales agreement is designed to keep you and the seller safe financially and legally. For the buyer, a standard purchase and sale will include provisions such as:

1. Non-Compete Agreement

This prevents the seller from opening up a competing business in the same area after a dental practice has been purchased. The last thing a buyer would want is for the existing patient base to disappear because the former dentist is now operating down the road.

2. Non-Solicit Agreement

This prevents the seller from taking (or “poaching”) the team members or patients. This way, you as the buyer have the choice to keep or let go of your inherited team members. In addition, ideally you will have a healthy patient base and staffing right from the start.

3. Indemnification Agreement

If the seller’s practice is the subject of litigation, in arbitration, or found to have broken the law in any way, the purchase and sale agreement protects you the buyer from being held responsible.  Regardless of the fact that you’re the new owner, this keeps you from having to deal major problem you didn’t create in the first place!

4. Confidentiality Agreement

Not every piece of knowledge about a business, buyer, or seller should to be public knowledge. The purchase and sale agreement outlines what can be shared openly by both parties.

5. Intellectual Property Agreement

This allows buyers to use any trademarks or branding associated with the practice if they choose to do so. The purchase and sale agreement helps make the consistency of marketing. Ultimately this can make the transition smoother at the beginning. If a buyer wants to change the name, this also allows them time to do so.

When to Bring in Experts

A purchase and sales agreement is a legally-binding document, so you should at least work with a lawyer when putting one together. That way, they can make sure the terms are in line with local, state, and federal laws while also guaranteeing you aren’t exposed to liability. If you have a team that is helping you buy the practice, they should also look at it so they can guarantee that it is favorable for you.

When done well, a purchase and sales agreement should allow you to sleep a little easier while buying a dental practice, because when it’s put together correctly, you can know for certain that your business and finances are well protected.

About Next Level Consultants

Next Level Consultants is led by Michael Dinsio, a former banker who has helped close deals for hundreds of dental practices around the country, and Paula Quinn, a practicing dental hygienist, practice owner, and consultant. They and their expert team can help you through each step of the purchasing process, and to learn more about their services, contact us today.