Selling a Dental Practice: How Sales Work and Why Buyer Finance Matters

How dental practice sales work

Selling a dental practice is usually the largest financial decision of a practice owner’s career, and it involves more than agreeing a price. Dental practice sales bring together a valuation, a buyer, the NHS contract where there is one, regulator registration, your team and the buyer’s finance, and the sale completes only when all of them are in place.

Many owners sell through a specialist dental practice sales agent, who values the practice, markets it, vets buyers and manages offers. Others sell privately, often to an associate who already works in the practice. The BDA’s advice on selling a practice covers whether you need to use an agency, how to make the practice attractive to buyers and the clauses you are likely to see in a sale agreement.

A sale is either an asset sale, where the buyer acquires the goodwill, equipment and other assets of the practice, or a share sale, where the buyer acquires the company that owns the practice. The structure affects tax, liabilities, the NHS contract route and what the buyer’s lender will ask for, so agree it early with your solicitor and accountant.

A typical sale runs in this order:

1. Prepare the practice and obtain a valuation.
2. Market the practice, or approach a buyer you already know.
3. Agree heads of terms with a buyer, covering the price, what is included, any deferred element and any handover period.
4. The buyer carries out due diligence and applies for finance, while both sides start the regulatory steps.
5. Agree the sale contract, the NHS contract route and the lease or premises arrangements.
6. Complete once the legal, regulatory and finance conditions are all met.

Valuing a dental practice and its goodwill

A dental practice valuation is usually prepared by a specialist dental valuer or agent. Most of the price is normally goodwill: the value of the patient base, the income it generates and the reputation of the practice. Equipment, stock and, where included, the freehold are valued separately.

Valuers look at the practice’s sustainable profits, the mix of NHS, private and plan income, the NHS contract and its delivery, patient numbers, how much of the income depends on you personally, the team, the condition of the surgeries and the premises. A practice whose income is spread across a stable team, with a long lease and well-kept surgeries, is easier for a buyer to fund.

The price also has to work for the buyer’s lender. Lenders assess whether the goodwill is likely to hold up under new ownership and how much of the price they will fund. A valuation that lenders will not support can stall a sale, while one that a buyer can fund comfortably widens the pool of buyers. Our page on goodwill finance explains how lenders approach it.

The NHS contract on a sale

Where the practice holds an NHS contract, the contract is between the commissioner and the contractor, and it does not simply pass to the buyer. In England, the NHS England policy book for primary dental services sets out how changes to the contracting party are handled, including partnership changes, company changes, retirement and novations. Usually both parties must agree a variation for it to take effect.

• Individual to partnership: a GDS contractor proposing to practise in partnership must give the commissioner written notice, with a change date not less than 28 days after the notice is served.
• Moving to or from a company: the policy book treats this as a complete change of contracting party, handled by a novation agreement that replaces the existing contract. It says agreement to novate should be made conditional on the new contractor being CQC registered.
• Share sales: a novation agreement includes a change of control clause, so shareholders cannot change without the commissioner’s prior consent, which should not be unreasonably withheld or delayed.
• Retirement: a single-handed contractor retiring must give the commissioner written notice of not less than three months.

The route for your contract is a legal question your solicitor will lead, but it matters to the buyer’s lender, which will usually want to see that the route is understood and progressing before releasing funds. NHS England has also introduced quality and payment reforms to the dental contract, which buyers and their advisers will want to understand. Wales, Scotland and Northern Ireland have their own NHS dental arrangements.

CQC, HIW and other registration

In England, the CQC’s guidance on buying, selling or transferring a registered business says that on a full sale the seller must cancel their CQC provider registration, and on a partial sale apply to change it. The buyer must be registered before providing the regulated activities. Both providers should apply around the same time, so the CQC can link the applications and assess them together, and the CQC can issue a position statement letter on request.

If the buyer is a company, the General Dental Council’s rules on dental bodies corporate affect how it is structured, which is the buyer’s solicitor’s concern but can affect your timetable.

In Wales, private dental practices must be registered with Healthcare Inspectorate Wales. In Scotland, private clinics must be registered with Healthcare Improvement Scotland. In Northern Ireland, the RQIA dental registration guidance says the new owner must re-register the practice in their own name, and the outgoing owner should apply to cancel their registration. Your solicitor will confirm what applies to your practice.

Associates, staff and TUPE

When a business changes owner, GOV.UK’s guidance on business transfers, takeovers and TUPE explains that employees may be protected: their terms and conditions transfer to the new owner and their continuity of employment is maintained. The BDA has advice on TUPE when a dental practice is sold.

Associates may be self-employed under associate agreements rather than employees, so how they are affected depends on their status and agreements. Your solicitor will advise. For the buyer and their lender, the team matters because it supports patient retention: expect questions about who your associates are, how long they have been with you, their notice periods and whether they are expected to stay.

If you treat a large share of the patients yourself, buyers and lenders will often look for a handover period, with you staying on for a time after completion. Agreeing how long you are willing to stay helps buyers fund the purchase.

Tax on the sale

Selling a practice usually means Capital Gains Tax on any gain. Business Asset Disposal Relief may reduce the tax you pay when you sell all or part of a business. GOV.UK sets out the conditions: for a sole trader or business partner, broadly that you have owned the business for at least two years up to the date of sale, and for shares, that you have been an employee or office holder of a trading company for at least two years. Take advice from an accountant with dental experience before you agree the structure of the sale.

How buyer finance affects the sale

Most buyers borrow to buy a dental practice, so the buyer’s lender is part of your sale whether you deal with it or not. The lender will want the practice’s accounts and current figures, the valuation, details of the NHS contract and the team, the lease and the CQC position, and it will set conditions that must be met before it releases funds.

A buyer whose finance is lined up early is less likely to hold up completion, because the lender’s questions are answered while the legal and regulatory work is under way rather than at the end. When you compare offers, ask how each buyer intends to fund the purchase and how far they have got. The highest price is worth less if the buyer cannot fund it.

You can help. Have the information lenders need ready, and point buyers, including associates buying from you, to finance early. We arrange finance for dental practice purchases across the whole of the market: we search the market for lenders that fund dental acquisitions and present the buyer’s case. Buyers can read about practice acquisition finance and our guide to buying a dental practice, or get instant quotes.

Deferred consideration, where part of the price is paid after completion, can help a buyer whose lender will not fund the whole price on day one. It also means you carry some risk after the sale, so take advice before agreeing it.

Preparing your dental practice for sale

Buyers and their lenders ask for much the same information, so preparing it before you go to market saves time later:

• Accounts: several years of accounts and current figures, split between NHS, private and plan income.
• NHS contract: the contract, contracted activity and recent delivery against it.
• Patients: active patient numbers, plan membership and how many patients you treat personally.
• People: associate agreements, staff contracts and who is expected to stay.
• Compliance: your registration and recent CQC, HIW, HIS or RQIA inspection outcomes.
• Premises: the lease, its remaining term, rent reviews and whether the landlord’s consent to an assignment is needed, or the freehold details if the property is included.
• Equipment: a list of chairs, imaging and decontamination equipment, with ages and any finance outstanding on them.

A short lease can reduce what a buyer can borrow, because the goodwill depends on trading from those premises. If your lease is near its end, talk to your landlord and solicitor before you market the practice.

Selling to an associate or partner

Selling to an associate who already works in the practice can make the handover smoother, because patients and the team already know them. An associate may buy the whole practice or buy a share first, with the rest later. See partner buy-in finance and our guide to partner retirement and succession funding for how these are usually funded, and succession finance for planned handovers.

How we can help

We do not sell practices, but we arrange the finance that lets buyers buy them. We search the market across the whole of the market, with access to 300+ lenders including specialist professions lenders, high-street and challenger banks, and present each buyer’s case to the lenders most likely to suit it. Finance is subject to status, lender criteria and approval.

If you are selling, point your buyer to dental practice loans or instant quotes. If you are buying a practice to replace or add to the one you are selling, see practice acquisition finance and how it works.

Common questions

This guide is for general information only and should not be treated as legal, tax, accounting or financial advice. Funding availability and lender requirements depend on individual circumstances.