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October 19, 2020 Rebecca

How to Navigate the Negotiation Process of a Dental Practice Transition

A dental practice transition shouldn’t be taken lightly, no matter which side of the contract you’re on. In fact, this is your chance to stand up for what you need in order to move forward with this next phase of your life. After all, you’ll want to set yourself up for success, whether you’re buying your first dental practice or selling your business for the last 20 years. Here’s how to navigate the negotiation process of a dental practice transition.

Representation

As part of the negotiation process, both the buyer and the seller will each have their own broker to act as a fiduciary for the best interest of their party to negotiate on behalf of. Another option is a transaction broker that does not have fiduciary for buyer or seller but instead acts as a neutral resource to help both parties complete a transaction.

Letter of intent

When a letter of intent is reviewed with the seller’s broker, within five days, a response is expected. In addition to the options to accept counter-offer in terms of price, closing date, and more, many sellers will want to include an employment contract as part of the negotiation, though most states won’t allow it. Also, declining the offer doesn’t mean the seller won’t accept another offer but rather they don’t want to negotiate, so think twice before laying those terms on the line.

Negotiation

The negotiation process doesn’t have to include a lot of papers back and forth over the course of five days. Rather, it is a conversation between broker and seller and broker and buyer. The goal is to come up with terms that are amenable to all parties. Once the terms are reached, both parties sign the LOI, and the due diligence process begins.

Contracts

Over the course of 30 days, the buyer and seller will enter into a series of documents detailing the transaction, including the purchase agreement, which goes into the specifics of both hard and soft assets. As part of this agreement, asset allocation is the way the purchase price is divided up as a negotiation between the buyer and the seller.

What’s next?

Contact the experts at Professional Transition Strategies for more information on the negotiation and entire dental practice transition process.



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