So, your broker has found you an awesome Buyer for your practice, you’ve received and accepted the Letter of Intent, the attorneys are working on the Asset Purchase Agreement, and all systems are Go! What are some of the important details that you or your Buyer can do just before and just after the closing to ensure a smooth transition. Here are 10 useful tips:
- If the Accounts Receivable will not be purchased as part of the sale, work very hard to reduce the amount prior to closing. Even if addressed in the APA, it becomes very cumbersome for the new owner to collect on your behalf. Unpaid accounts become more difficult to send to collections agencies, or there could even be a change of personnel at the front desk, possibly further limiting collections efficiency.
- Prior to sale the Seller should clean up old inactive accounts, write off uncollected balances, and minimize credits owed patients, particularly on inactive accounts. All credits on books must be given to Buyer at time of sale or refunded back to the patient.
- The Buyer should begin insurance credentialing and fee re-negotiation as soon as possible, preferably immediately after acceptance of the Letter of Intent. Be certain the Seller is aware of the application since the insurance companies frequently send materials to the office address in the name of the Buyer, which creates a confidentiality issue with staff who have not yet been informed about the sale.
- If there is a lease term remaining which has been extended and/or assigned to the new owner, be sure to try to obtain a release from the landlord. Most tenants do not realize they are jointly liable for the remainder of the original lease term when a lease is assigned unless a signed release is obtained.
- Be up to date on any Accounts Payable, and list all of the vendors that will need to be changed, cancelled, or assigned to the new owner. New owner should be made aware of any annual contract terms and conditions.
- Jointly, write a great Patient Transition Letter, signed by the Seller, but mostly introducing the new owner. Have it printed and ready for distribution immediately after closing.
- Post-closing, cancel any business related insurances, such as business overhead and worker’s compensation. Malpractice insurance can be reduced to part-time status or cancelled dependent on your post-closing plans to further practice AND the type of policy you maintained where a Tail policy may be required for a period of time.
- Keep track of any expenses incurred on the practice after closing, pro-rate any annual expenses previously paid, and settle these expenses with the new owner 30-60 days post-closing.
- Be aware that transitioning away from your patients and your dental team may be more emotionally difficult than you expect, no matter what stage of your career you do so.
- Be sure to stay in touch with your Buyer, offer advice when needed, and assist in the introduction to specialists, labs and vendors.
Your practice sale or purchase is a life-changing event, and your team of advisors will help you through the process, but not neglecting the small issues will keep your transition smooth and your stress minimal.