After an analysis of the practice has been completed and the seller is ready to place the practice on the market, a LISTING AGREEMENT will be drafted between the seller/client and the transition company. This document will detail the terms of the working relationship to include such things as commissions and duration of the agreement, liabilities, and representations and, perhaps most importantly, the asking price for the practice. If real estate is involved, a separate agreement is created to address similar issues in that transaction. The listing agreement makes it very clear who the broker and transition company represents. We believe any sort of dual representation presents a clear conflict of interest in a contingency sales agreement.

Once a listing agreement has been secured, potential buyers and/or associates are notified of the opportunity. All prospects should expect to sign a NONDISCLOSURE or confidentiality agreement. The heart of this agreement states that the prospect will not disclose any information about the subject practice to anyone other than their spouse and any professional advisors. Those advisors should also be made aware that their client has signed such an agreement. Take this issue very seriously and consider all information and conversations confidential until after the closing. This agreement works both ways as the buyer may be in a situation where they have some risk if their current employer finds out they are looking for another opportunity. The old wartime phrase "loose lips sinks ships" can be directly applied to the sale of dental practices. Sellers should demand compliance as any breech may terminate the sale or at the very least may have a negative impact on the transfer of goodwill between the parties.

Once a prospective buyer has decided that this is the opportunity the wish to pursue, the next step is the presentation to the seller of a LETTER OF INTENT (LOI), or OFFER TO PURCHASE. While resembling contracts, they are usually not binding except for certain provisions such as Nondisclosure agreements and covenants to negotiate in good faith. This document should outline the basic plan about how the parties will move forward in good faith towards closing. It includes price, any proposed seller carry back and terms, escrow amount, and closing date. Since a COVENANT NOT TO COMPETE is frequently such a major item in these cases, we suggest it also be proposed. We have discussed covenants in the past and remind all parties that regardless of what is agreed to, treat it as though it is fully enforceable. Contingencies to closing might include the availability of financing, proper licensing and appropriate DUE DILIGENCE. In common language, Due Diligence would be the mandatory review process done by the buyer of information presented by the seller to make sure they are getting what they plan to pay for.

Once Due Diligence has been accomplished and everyone is satisfied with the outcome, the parties can move toward a final PURCHASE AND SALE AGREEMENT and closing. I will not go into great detail about this agreement (sometimes also known as an Asset Purchase agreement) in this space as it demands an article unto itself. We strongly suggest however that both sides be represented by legal counsel in the creation and negotiation of this document. It is as foolish to think you can do this on your own as to believe an attorney could cut a nice crown prep. Signing of this document (along with a BILL OF SALE) at closing is the consummation of the transaction and a signal for "consideration" to be exchanged.

One final document, while not having a direct bearing on an agreement between the buyer and seller, may never the less have a profound effect on the future value and continuation of the client-dentist's life work. All doctors should have a MEMO OF DIRECTION for their practice on file. Why let the value of perhaps your largest asset decline because you have given surviving family members no clue as to who to call and how to dispose of your practice in the event of your unexpected death or incapacitation? Every practicing doctor should be aware of who in their area is recognized for their experience in transitioning dental practices. Most professionals will be happy to meet with you, record some basic information about you and your practice and provide you with the proper form. You owe it to your family, staff, and your patients.

Most dentists see themselves as fair and honest people who could do business with a handshake. The purchase or sale of their practice is not the time for such sentiment. Expect to receive, review, and live by the terms of any agreement you make and the odds of a successful transition will be greatly improved.