Prepare
1. Assemble your team. Bring in a team of Advisors that specializes in dental practices before you start looking, so you can move quickly when the right practice comes up.
2. Get pre-qualified for financing. Lenders review your credit, clinical production history and liquidity. Knowing your budget early saves time for everyone.
3. Define your criteria. Location, number of operatories, collections range, payer mix (PPO vs. fee-for-service), type of dentistry, and whether you want the seller to stay on for a transition period.
Find and Evaluate
4. Search and screen practices. Use brokers, listings, dental supply representatives and your professional network. Review the summary prospectus first.
5. Sign an NDA and request data. Ask for three years of tax returns and P&Ls, production and collections reports, A/R aging, fee schedule, payer mix, active patient counts, staff roster and pay, the lease and an equipment list.
6. Complete the financial review and valuation. Calculate owner’s discretionary income (ODI) or adjusted EBITDA, benchmark overhead, confirm that collections tie to the tax returns, and test debt service coverage at your financing terms.
7. Visit the office. Tour after hours, coordinated through the seller. Assess the equipment, layout, parking and room to grow.
Negotiate and Verify
8. Submit a letter of intent (LOI). Set out the price, asset allocation, seller transition period, non-compete, treatment of A/R, contingencies and exclusivity.
9. Perform full due diligence. Audit charts, confirm insurance contract assignability and true active patients, interview staff when permitted, review the lease and equipment age, and check licensing, compliance and any legal issues.
10. Secure financing and the lease. Complete the lender’s appraisal and approval, and arrange an assignment of the lease or a new lease with the landlord. The lease is often the longest item.
11. Sign the asset purchase agreement. Have your attorney draft or review it, including the purchase price allocation (which affects your taxes), representations and warranties, non-compete, transition period and patient records.
Close and Transition
12. Set up your business. Form your professional corporation and obtain an EIN, then begin insurance credentialing early (it can take 60 to 120 days). Obtain a Type 2 NPI, DEA and Dental Board permits, and set up payroll, banking, insurance and software.
13. Close the transaction. Funding and signing, transfer of patient records, and announcement letters to patients.
14. Manage the transition. Retain the staff, introduce yourself to patients alongside the seller, keep systems steady for the first 6 to 12 months, and track patient retention.