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Conducting Due Diligence for a Dental Practice Purchase

Thinking of purchasing a dental practice? Purchasing an existing and established dental practice can have many perks. There may be a sizeable and well-settled client base as well as trusted staff members, efficient systems in place, and much more. Before you purchase a practice, however, due diligence is critical. You do not want any surprises popping up down the road after making such a substantial investment. It can take time and resources, but comprehensive and thorough due diligence is essential before you buy any dental practice.

Conducting Due Diligence for a Dental Practice Purchase

The more due diligence, the less the risk. Remind yourself of that as due diligence can be seen as a real hassle. You may be excited to dive right in and purchase a dental practice that looks attractive for a number of reasons. Do not rush this. Even those dental practices that can seem like a great deal on the surface can come with serious underlying problems that you are not going to want to deal with. Let’s take a look at some of what is involved in due diligence.

Due diligence is the process where a purchaser assesses all aspects of a dental practice for sale. It involves verifying and confirming the things the seller has asserted about the practice. Essentially, it is a trust but verify situation. It will involve extensive investigation into the practice’s financial records. You are going to want to have payment records, accounts receivable, and accounts payable, as well as cash deposits reviewed. You will also want the profit and loss statements of the practice reviewed as well as their balance sheets and tax returns for at least the previous three years.

You will also want to review any ongoing contracts that the practice is a party to. These contractual obligations may pass to you after the purchase as finalized. Verify what you may be legally obligated to do under these contracts.

Check out the practice’s reputation in the community and among other relevant parties such as suppliers. You may have heard of the practice’s reputation from the seller, but you will want to hear about it from others as well. Additionally, ask after the reason the seller is actually selling the business. This can give you insight into the practice’s potential problems or rooms for improvement.

Due diligence should also involve an evaluation of what you are getting along with your purchase of the practice. For instance, are tools and equipment included? If so, check out that they are in good working condition. Evaluate how much longer it will be until you need to replace anything and how you are going to pay for those replacements when the time comes. Additionally, you may also be getting some of the practice’s intellectual property and business name. Are there any issues incident to these things? Any pending litigation that you need to be aware of?

Dental Law Attorneys

There is much to do in due diligence. Let the trusted team at Mahan Dental Law handle it for you. Contact us today.