If you have decided to sell your practice, put your house is in order before the sale gets underway, to help avoid any unnecessary headaches.
Here are some useful tips to help that process along.
Questions and more questions
A prospective buyer will want information about your practice before they buy it, so that they can evaluate where the risks, if any, lie in your business. They will normally send you quite a detailed questionnaire, covering questions on:
- The structure of your business
- Your compliance with RCVS registration
- Any existing contracts, in particular with any buying groups, related to your clinical waste and your practice management system
- Any hire purchase or lease agreements, their terms and the amounts still to be paid
- Details of RPA inspections
- HSE registration and consent
- Your out-of-hours arrangements
- Details of locums used
- Pet health plans offered or free insurance
- Practice insurance including your VDS insurance
- Data protection compliance
- Domain name registrations
- Your employees, including copies of employment contracts
- Maintenance records and agreements for the assets
- Property used and/or owned by the business.
The buyer will also raise Commercial Property Standard Enquiries and other property enquiries about your ownership or occupation of the property used by the practice.
Their accountants will ask financial due diligence questions, related to your SAGE or management accounts, VAT, employee taxes, tax computations and the profit and loss of the business.
The buyer will also want to know about any ongoing liabilities, hence the questions about hire purchase agreements and the details of all contracts, including what notice periods are needed on any contracts they do not want.
Make sure you have organised all paperwork in respect of your business before you begin the sales process; that will make this process a lot easier and less stressful for you.
Do line your advisers up early on.
Your accountants will help with the structure of the sale – will it be a share sale or asset sale if you are a company, for instance – and to get the practice valued. Early tax advice may help you decide which route is best for you, by identifying the tax advantages of one option over another.
We often find that buyers may want to adjust the purchase price with reference to completion accounts. They may want the sellers to carry on working at the practice after completion to allow for a smooth transition and might incentivise seller to do so by offering further consideration based on the practice’s future turnover. Think about whether you would want to stay on after completion before approaching perspective buyers.
Once a potential buyer is found, your accountants and solicitors should help negotiate the heads of terms to start the whole process on the right footing. These will set out the key terms of the proposed sale including the agreed price, when it will be paid, a proposed date for completion and an agreement for both parties to keep the proposed sale confidential. Although this document is not usually legally binding, it indicates parties’ intentions and should allow you to draft a timetable.
A timetable to completion will focus everyone’s minds on what is needed and by when. It is important to have realistic expectations, bearing in mind that you will still be running a busy veterinary practice whilst going through the sale process.
You will need to allow enough time for the buyer to undertake due diligence and for the parties to negotiate the terms of the sale agreement and any additional documentation to achieve their objectives. Do also factor in consultation with employees.