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"Due Diligence is often Underestimated"

Find out why with a joint article with Reena Popat, one of Pluto’s top legal connections, and learn a new Latin word!

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Sitting in that tiny little classroom not far from Rome all those years ago, I never would have imagined how many times Latin has come back into my life. I’ve always been fascinated by the language and how it has survived. Caveat emptor is a neo-Latin phrase that translates to “let the buyer beware”.

Now how does this apply to dental practice salesand why is it so important? Caveat emptor is a principle of contract law that places responsibility on the buyer to perform necessary due diligence before completing the purchase of the dental practice. Due diligence can seem slightly vague, but it’s one of the most crucial stages of the deal. It gives the prospective buyer a chance to fully examine the dental practice and receive confirmation on the material facts provided by the seller. The buyer needs to be certain that they’re happy with the commercial potential and have asked every question they have.

The whole process can take between 2 and 3 months and can often be subject to delays, but by working with the top dental solicitor’s, they know the right questions to ask to get everything running smoothly. Reena is one of those solicitors -

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Reena Popat, Managing Partner at Carter Bond


Brace yourself, you are due diligence!

Take it from us, the due diligence process is very important and should not be taken lightly. In matters of business acquisitions, in particular dental practices, it is vital to understand the position of the practice and any liabilities that you may be inheriting.

What is Due Diligence?

The process of due diligence involves both the buyer and seller’s representatives communicating with each other to respond to enquiries about the practice.

This an opportunity to understand and assess all the risks associated with buying a dental practice. Examples of this include, checking annual accounts to confirm the financial position of the practice, checking customer lists to ensure the business does have the customers they claim to and enquiring about any potential or former litigation.

Due diligence can also include enquiries about the property which the practice operates out of.

For example you may have to take over a lease which means, you will then need to be aware of future development plans, facilities available at the property and obligations under the lease


“The seller is a known associate of mine; do I still need to do due diligence?”

This question comes up often. Buyers of such practices may know the seller in some sort of professional or personal capacity and feel they can avoid the due diligence process for a ‘quicker’ sale.

While we always understand the need for a timely and efficient transaction, we continue to inform our client’s of the potential consequences of not undertaking due diligence.

You don’t want to get to or past completion and realise there are fundamental flaws in the practice. A last minute abortion of the deal will still incur huge abortive legal fees.

Consider that if the seller is an associate, they should have no trouble in answering any enquiries you have.


Emphasis

Due diligence can seem like a process that is designed to elongate an acquisition further than it should be and clients have even been led to believe the process is to catch sellers out and lower purchase prices.

Due diligence is there to protect both buyer and seller from entering into a transaction where both parties are satisfied and aware of the implications of a successful sale.

If both the seller, their accountants and solicitors respond to the buyer’s queries in a timely manner than this process may not take as long as it often needs to and can reassure both parties this is the best outcome for both.

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We all know the saying “don’t judge a book by its cover”, and it applies to dental practice sales. You cannot judge a practice on face value, you need to take your time. Yes, due diligence can be stressful and can occasionally test one’s patience, but it can also be seen as an exciting time.

You might be a first-time buyer walking around seeing the potential for your new business to flourish, or a corporate identifying a natural fit to their strategy. We try find the perfect matches. It’s a chance to ask a million questions and feel at ease with the decision and confident in your choice. From the seller’s side the process can be deemed as intrusive, but they normally remember going through the same stage of buying themselves.

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At Pluto we know the dental practice sales process is all about experience and our team can offer you a unique combination of support. You’ll have myself at all times and also the advice of our Clinical Advisor, Dr. Pieter Claassen, who has gone through due diligence multiple times as a practice owner. I’ve overseen my fair share of dental practice sales, but I’m certainly no dentist, so Pieter offers a more peer to peer aspect.

Get in contact and let us share your journey!

Phone 0800 086 2315

Email info@plutopartners.co.uk

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