In some respects, dental practice acquisitions are like the purchase of any other business. However, there are some unique aspects that need to be handled correctly if disaster is to be avoided.
The key differences with Dental practices relate to regulation of dental practices by CQC and the relationship with NHS England (NHSE) where there are NHS contracts in place. CQC requires any changes to a practice in terms of owners and registered managers to be notified in advance of a change of ownership and approved with effect from that change of ownership. Provided there are no serious issues over the practice and enough time is allowed for the CQC applications with up to date DBS checks in place, the process is usually problem free if a little tedious.
NHS contracts, however, are not so straightforward since it is easy to find yourself, as a dentist, in breach of the NHS contract and risking termination by NHSE. This could spell disaster for the practice since many are heavily dependent on the NHS contract income.
Most NHS contracts are for general dental services (GDS contracts) and others for personal dental services (PDS contracts). PDS contracts are not transferrable (e.g., on a sale of a practice) without the formal consent of the Local Area Team and no procedure for transfer is set out in the contract. Obtaining consent is an uncertain process with no guarantee of success.
GDS contracts, on the other hand, still require NHSE consent for transfer, but contain a procedure where the seller brings the buyer in as a partner under the contract at completion and the seller then (usually a few months later) retires from the partnership, leaving only the buyer as a party to the contract with NHSE. Again, tedious but it works.
Bigger problems can arise where an individual seller has a GDS contract in their name but they have previously transferred their practice (but not the NHS contract) to their company (usually for tax reasons). All GDS contracts prohibit assigning the benefit of the contract so, if the goodwill of the practice is moved to the company leaving the contract itself in the name of the dentist, the dentist is in breach and risks contract termination. A buyer would inherit that risk from the seller.
Where the NHS contract is transferred with NHSE consent by a dentist to their company the original dentist remains personally liable under the contract for any defaults of the company for the life of the contract and NHSE consent is required for any sale of the company later on (so rarely attractive to a seller). From a buyer’s perspective, suitable provisions need to be inserted in any purchase contract to make the deal conditional on NHSE consent.
Similarly, a buyer who acquires the contract under the partnership/retirement procedure but then puts the practice into a company will be in breach if the goodwill of the NHS practice is moved across to the company. Many dentists and their advisors are unaware of this.
Dentists, therefore, need proper legal advice on these matters before parting with their cash (or borrowed money) on any practice purchase as the practice may be virtually worthless if the NHS contract is terminated.