The following is a discussion of the issues surrounding the sale of a dental (or medical) practice and how it can be beneficial to maintain confidentiality during the transaction, as well as some suggestions about how to sell your dental practice confidentially.
Typically, a dentist or physician will want to sell their medical or dental practice confidentially. The benefit here is that it allows the seller to maintain a premium purchase price because the value of the business, including its clients and goodwill, remain intact through the process of transferring over the assets.
Otherwise, employees may quit because they are unsure of their future place at the practice and customer may leave in search of someone new because of a fear of the unknown and a decline in prospective performance. Potential issues can also arise with competitors spreading rumors or creditors becoming alarmed.
All of these do not take into account the fact that from a seller standpoint, a business known to be for sale for a long period of time can appear to be “shopworn merchandise,” or an investment that begins to lose its appeal, resulting in the price being driven down.
Where confidentiality is a concern for the seller, there are several steps that can be undertaken to help maintain the state of the business and preserve the practice’s premium selling price.
Blind Advertisements & Listings
A “blind ad” is an advertisement aimed at camouflaging the business identity of the seller with a multiple listing database descriptions of the business utilized to cover-up its full identity. Blind ads that are carefully worded become exceedingly important herein because while attracting prospective buyers may be the ultimate goal, the ad is attempting to also guard the business identity.
There is a balance herein between generality and specificity as the former allows for a greater blanket of confidentiality over the transaction while the latter may provide a greater competitive advantage in soliciting buyer prospects and selling the business within a shorter timeframe.
Release Information In Phases
Another way to maintain confidentiality throughout the sale transaction is to release practice information in stages. Rather than drafting an entire report or creating a complete package, the seller can manage the process such that prospective buyers receive proprietary and financial information released in stages.
If not as part of a scheduled plan, the seller can assess how the negotiation proceeds forward, discerning the buyer’s level of trustworthiness and sincerity at each step of the way.
A document summarizing the offer can be used to give an overview of what is on the table (an “Executive Summary”) while other documents, such as a background narrative, a financial overview, and an appendix of technical disclosures and other materials that may be relevant.
Ideally, the seller will only begin to disclose proprietary business information once an acceptable offer is made in writing. The seller should aim to not release information until it has been requested by a prospective buyer, and it is acceptable for the seller to withhold proprietary business information prior to receiving an offer that is acceptable.
Maintain Confidentiality In-House
As the seller, it is important to maintain confidentiality surrounding any pending sale within daily activities at your practice, including those involving customers, vendors, and employees. In addition, it is fair to request that any potential buyers sign a reasonable non-disclosure agreement at the start of the due-diligence process to help protect this confidentiality.
Loyalty and Stability when selling your Dental Practice Confidentially
Loyalty and stability are often two key needs of any selling practitioner during the sale period, and these can best be achieved by considering these steps and consulting with a Dental Attorney to aid in the process of managing the transition of your dental practice confidentially.
ODGERS LAW GROUP focuses on working with Dentists on business formations, practice transitions, and the development of strategic business plans aimed to help maximize protection and reduce tax liabilities. The firm also handles matters of compliance in Corporate Law and can be an asset to your organization as it navigates the corporate regulatory environment. To learn more about business law or to schedule your free consultation with Mr. Odgers, contact us by e-mail, call us at (858) 869-1114, or schedule your appointment online here.