THE DUE DILIGENCE PROCESS
What is due diligence? Due diligence fundamentally means investigation or reviewing. This step generally takes place in the initial stages of the purchase of a dental clinic as a clause to this effect is included in the letter of intent. If no due diligence is conducted, buyers are putting their money at risk. The reason behind the due diligence clause is rooted in the ancient Latin phrase ‘Caveat Emptor’, which translates to ‘Let the buyer beware’. This expression instructs the purchasing party to rely upon his own inquiries, investigations and findings upon making the decision to undergo an investment or not.
It is paramount to conduct a proper due diligence from both the point of view of the buyer as well as the point of view of the seller. The due diligence process allows the purchasing party to know exactly what he or she is buying and to make sure that no adverse effect resulting from the transaction might arise. On the other hand, the selling party needs to conduct a proper due diligence to ensure that he or she can truly sell the dental practice. This step requires an attentive analysis of the dental practice by qualified professionals in the field that know exactly what to look for. For the proper and required guidance and consulting through the acquisition or sale of a dental clinic, please contact our team of lawyers.
DUE DILIGENCE CHECKLIST
Review of the appraisal of the dental practice
Review of corporate records of the practice if buying shares of a professional corporation
Patient chart auditing, to confirm the value of a clinic’s goodwill.
Determine whether you are purchasing assets or shares and review the tax implications relating to this decision.
Review of any existing agreements entered into by the seller.
Review of associate and employment contracts, internal policies, vacation policies, increases of salary.
Review of lease of the clinic premises (demolition, relocation, termination clause, option to renew, lease terms, duration of term, transferability of lease).
Review of the purchase or lease of material contracts for equipment or leasehold improvements.
Analysis of any potential or pending litigation
Review of financial aspects of the practice if shares are being purchased.
Prior to purchasing any practice, whether you are buying assets or shares, it is important that a proper due diligence be conducted by experienced professionals in the field of dentistry to avoid any mistakes and pitfalls.