Closing on a Dental Practice Sale Effectively
You’ve put in all the hard work to find a practice to buy, figure out its value to you, and negotiate every detail with the owner. You’ve done all your due diligence and lined up financing. It’s time to seal the deal.
Let’s dive into detail about what you need to know.
What Does Closing on a Dental Practice Involve?
Buying a dental practice is a rollercoaster ride. After the thrills of searching, finding your ideal practice, and negotiating a deal, it all comes down to closing day. This is when the keys officially change hands and you step into the owner’s shoes.
I won’t lie to you; closing can be a white-knuckle experience. Contracts. Licenses. Loans. Inventory. Keys. Alarm codes.
Take a deep breath. I’ve guided hundreds of dentists through this process. I’ll walk you through the typical closing timeline and spotlight key action steps. Before you know it, you’ll be enjoying the view from the top, keys in hand, as the new practice owner! Exhale. We’ve got this.
Here are the main aspects of the closing process that you’ll need to keep an eye on:
- Financing and down payment will be handled, and final loan documents will be signed.
- Legal documentation: purchase contracts and ownership transfer agreements need to be thoroughly vetted and finalized.
- Licensing: all business and professional licenses get transferred to you from the seller.
- Insurance: the proper policies need to be in place in your name.
- Closing costs: you need to have a thorough breakdown of itemized costs and have funds at the ready to cover them.
- Ownership transfer: you need to review the transfer plan and handle the formal exchange of ownership with the seller.
- Facility access: you’ll receive the keys, codes, and access to the practice and all it entails.
Those are the main areas you need to be aware of in a closing. Now let’s look at the timeline for a typical practice acquisition to close.
Practice Acquisition Closing Timeline
You’ve already handled all your due diligence, secured your financing, negotiated terms, and created a dental practice transition plan that the seller is on board with. For the actual closing, here are the 7 steps buyers go through:
7-10 Days Before Closing
- Confirm transition plan and staffing
- Activate utilities, insurance, and key accounts in your name
1-3 Days Before Closing
- Sign final loan documents
- Get copies of licenses
- Review closing cost ledger
- Sign ownership contracts
- Get keys, codes, and inventory
Let’s get into each of these stages in detail.
One: Confirm Transition Plan and Staffing
Use the 7-10 days leading up to closing to finalize the dental practice transition and staffing plans with the current owner and employees.
Schedule a meeting with the seller to review the transition plan you mutually created during negotiations. Reconfirm the changes you plan to make to operations, systems, processes, and staff responsibilities after taking over. Make sure you and the seller remain aligned so there are no surprises for the staff.
Have individual meetings with each staff member, especially key personnel such as the office manager. Tell the staff about the acquisition and communicate how their role won’t change (or if it will change, communicate that). Listen to any concerns and address them transparently.
Keep communication open as you confirm transition plans. An informed, supported team will help make the acquisition’s impact on patients seamless. If you need help with crafting an effective transition plan, contact us. We’re happy to help.
Two: Activate Utilities, Insurance, and Key Accounts in Your Name
In the week to 10 days before closing, contact all utility companies and vendors supplying services to the practice. Notify them of the upcoming change in ownership and provide the closing date.
Transfer electric, gas, water, telephone, internet, cable/satellite TV accounts into your name as the new owner. Schedule services to activate under your name on the official closing date to prevent any disruptions in service.
Activate all necessary insurance in your name (malpractice, liability, worker’s comp, etc.). Policies should activate at 12:01 AM on the day of the closing to avoid any gaps in coverage during the ownership transfer.
Three: Handle Financing
For your financing, you’ll need to sign the final loan documents prior to the closing.
Review the final loan terms with your lender to ensure they align with what you previously agreed during underwriting. Double check the interest rate, length of loan, fees, repayment terms, prepayment penalties, and every other detail.
Have the wire transfer information ready so the lender can wire the funds on closing day. Missing wire details can create complications and delay the acquisition.
Once you sign these final loan documents, you are committed to years of monthly payments. So scrutinize everything diligently before you sign your name. Take full advantage of your dental attorney throughout the financing process.
Four: Receive Copies of Licenses
Obtain copies of all current dental practice licenses from the seller. These include state dental practice permits, DEA registrations, state dental board registrations for the owner and all associate dentists, sedation permits, radiology permits, etc.
Review the documentation to ensure no licenses expire in the near future. Pay close attention to renewal dates. Let the seller know if you discover any credentials in need of renewal prior to closing.
Submit transfer applications for each license to the appropriate state licensing boards and regulatory agencies. For many licenses, the boards require transfer applications from the new owner to process approval.
Follow up frequently with the boards to check application status. Respond swiftly if they require additional documents or clarifications. This allows you to operate the practice immediately after acquisition.
Confirm with the boards that existing licenses remain valid until the official ownership transfer date. You do not want any lapses in credentialing that impact operating the practice post-closing even briefly.
Obtaining license transfers shows preparation. It also prevents potential legal issues and disruptions in legally treating patients, prescribing medications, and billing insurance after the practice changes hands.
Five: Review Closing Cost Ledger
In the final days before closing, your escrow officer will provide an itemized closing cost ledger to you and the seller. Check that all the costs match the terms you’ve negotiated.
The ledger outlines every fee charged at closing, including title fees, legal fees, recording fees, transfer taxes, etc. It also indicates which party pays each cost based on your purchase contract.
Scrutinize your portion of the closing fees for accuracy. Question any charges that seem abnormal compared to typical closing expenses.
Compare the final amounts to the estimates you received when under contract. Closing fees don’t usually change dramatically, but small changes can be routine. Closely monitor for variances right up to closing day.
Ensure the ledger also displays appropriate credits you are due, like prorated rent or reimbursements from the seller per your financial agreement. You worked hard negotiating those concessions—verify you received them.
Meticulously review the closing ledger to optimize your acquisition financially and ensure no surprise costs surface after closing that create frustration. If you need guidance during this review, contact us, and we’ll ensure you don’t miss any crucial information.
Six: Attend a Meeting to Sign Ownership Contracts
On closing day, you’ll meet with the seller to sign legal closing documents and finalize the transfer of ownership. Thoroughly review and understand these contracts before you add your signature to them.
The core documents include the asset purchase agreement, real estate contract (if applicable), bill of sale, promissory note, and security agreements.
Read each paragraph closely and ask questions. Compare everything to what you negotiated with the seller regarding assets purchased, exclusions, warranties, restrictions, etc.
Do not rush or feel pressured to sign. This meeting is your last chance to catch discrepancies before you become the practice owner.
Seven: Transfer Keys, Codes, and Inventory
The seller will give you keys, security codes, and access transmitters. You now have full access to operate the practice.
Make sure you have keys for exterior doors, interior offices, file cabinets, safes, sterilization areas, medication cabinets, etc. Missing a single key can disrupt your work.
Get all alarm codes, WiFi passwords, phone system codes, and any other access credentials. Keep these stored securely.
The seller will go over inventory counts with you: supplies, instruments, materials etc. Confirm quantities match negotiated lists and do visual inspection for defects.
This part seems mundane, but these details facilitate a smooth transition process.
Where are you Stuck?
Whether you’re trying to find a practice or have already closed on one, we provide expert guidance for every aspect of the deal. Click any of the links below to learn more.