A presentation made to the North West Florida Dental Association on entrance and exit strategies for a dental practice

1. The Practice of Dentistry:
Entrance, Exit & Middle:
Legal Issues
Robert C. Jackson, Esq.
&
Dion J. Moniz, Esq.
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2. The Practice of Dentistry:
Who are these guys . . . .
Robert C. Jackson, Esq.
&
Dion J. Moniz, Esq.
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3. The Practice of Dentistry:
This is YOU . . . <just out of school, etc>. . .
NOW WHAT
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4. Always Have a Team of Advisors
• Accounting
• Legal
• Financial
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Find ones you like and stick with them

5. Dealing with a Legal Professional
• Believe it or not, they are there to help
• Don’t be afraid to ask if any questions
• ALWAYS get budget & set a cap -
• don't just settle for “by the hour”
• Treat and be treated as member of team
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6. Limited Number of Entrance Options
1. JOIN an Existing Practice
• Corporate
• Independent
2. OPEN Your Own or Purchase Practice
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7. Joining an Existing Practice
Advantages:
• Guaranteed Salary (usually) / Benefits
• Training / Experience
• No Practice Management Issues
• Concentrate on Clinical Dentistry
• Some Liability Protection
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8. Joining an Existing Practice
Disadvantages:
• Production Pressure (corporate)
• Loss of Autonomy (clinical, business)
• Growth Opportunities?
• Tough To Build Your Own Business / Reputation
• Essentially Contract Labor
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9. Dental Personal Service Contracts
• Employment (one work location / work entity)
• Independent Contractor (multiple locations & work
entities)
• REMEMBER, CONTRACT ONLY AS GOOD AS
PERSON OR COMPANY BEHIND IT
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10. Rob’s Contracting Rule No. 1
THERE IS NO SUCH THING AS A
STANDARD CONTRACT
EVERYTHING IS NEGOTIABLE
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11. Rob’s Contracting Rule No. 2
Read and Understand Your Contract!
Put it all in there.
If you talk about it and its important, it needs to
go in the contract
Courts will assume terms negotiated
Parol Evidence Rule - Will exclude prior statements
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12. Typical Areas of Concern
• Compensation and Benefits
• Working Conditions (Duties, Shifts, Call?)
• Term and Termination
• Insurance and Risk Management
• Growth Opportunities
• Non-Compete
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13. Compensation & Benefits
Top Three Reasons For Contract Disputes
1. Compensation
2.
3.
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14. Compensation & Benefits
Top Three Reasons For Contract Disputes
1. Compensation
2. Compensation
3.
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15. Compensation & Benefits
Top Three Reasons For Contract Disputes
1. Compensation
2. Compensation
3. Compensation / Growth Expectations
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16. Compensation & Benefits
If you want to avoid contract disputes
be happy with and understand your
Compensation - clarify before
Lawsuits are devastating
My advice is to avoid if at all possible
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17. Other Important Terms
Work Conditions:
• make sure they will work for you
• life style issues
• realize your position
• negotiable - good place for give and take
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18. Other Important Terms
Term and Termination:
• Recommend as short as it has to be
• Minimum period for comfort
• No Cause termination (60-120 day)
• Avoids prolonged and painful goodbyes
• Cannot possibly anticipate all reasons to end
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19. Other Important Terms
Insurance and Risk Management:
• Claims Made Coverage
• Covers only claims made while policy in effect
• “Tail” coverage - both parties should plan for it
• Occurrence Coverage
• Covers claims occurring during policy period
• Less common, more $$$$
• If have it, enjoy it
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20. Growth Opportunities
Make Sure Contract Has Some.
If you talk about it, put it in writing
Common Reason for splits
Failed expectations on either side
Talk about price if buy out, or how to get there
Build in triggers if necessary
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21. Non-Competes
Highly Contentious in Florida
Still Valid, despite what you may have heard
Roller Coaster History
Settled down somewhat
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22. Non-Competes
Extremely fact and “fairness” based
Advice:
• Plan that it will be enforced
• If that won’t work (terminated unexpectedly .. . ):
• Be as Nice as you can (very hard to do)
• Do Not Solicit, Be Respectful of Business
• Contact a Lawyer
• Courts will typically balance interests
• No Magic bullets
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23. Open Own or Purchase Practice
Advantages:
• Your Own Boss
• Tax Advantages
Disadvantages:
• Your Own Boss (with great power, great responsibility)
• Employees
• Insurance Companies
• Vendors / Marketing
• Eat what you Kill
• Capital Intensive
• Limited Business Training
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24. Open Own or Purchase Practice
• Proper Business Entity (PLLC, PSC)
• Employees
• Equipment
• Insurance Contracts
• Location, Real Estate
• Practice Management
• Records
• HIPPA / Electronic Information
• Risk Management
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25. Open Own or Purchase Practice
Typical Time Line:
• Search (broker, on own, word of mouth)
• LOI (letter of intent) - non-binding
• Due Diligence Period (Very Important)
• Final Contract
• Closing
• Post Closing Period (transition in / out)
Experience similar for Buyer / Seller - cover in Exit
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26. The Dog that Caught the Car:
the “Middle”
• Legal Perspective - lay low, no news good news
• If you never see me or Dion - legal success!!
• Some areas of potential trouble (more in pm)
• Employees
• Malpractice, Professional Complaints
• Business Disputes (landlord, partners,
payment)
• Get in front of these issues BEFORE they blow up
• Practical - Decide if you own Practice or it owns you
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27. The Exit - Decide to Sell
1. Who are you going to sell to?
• Corporate
• Partner / Associate
2. Timing?
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28. Typical Sales Process
• Preparation / Marketing / Partnering
• LOI / Term Sheet
• Sales Contract (asset or stock sale)
• Real Estate (include or not)
• Financing
• Closing
• Post Closing Obligations
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29. Preparing to Sell
Get your records and practice in order
• Corporate records
• Insurance
• Accounts Receivable / Payable
• Patient records / HIPPA
• Real Estate (lease, etc)
• Litigation
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30. LOI / Term Sheet
• First Step in Sales Process - an offer
• Letter of Intent / Term Sheet
• Terms Used interchangeably
• Non-Binding (except confidentiality,
exclusive dealing)
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31. LOI / Term Sheet
• Starts Due Diligence process
• Chance to look at the practice
• Tip: Clean up issues before DD starts
• Summarizes Terms of Proposed Transaction
• The more information in LOI, better chance to
close
• Map of Transaction
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32. LOI / Term Sheet
• Price
• Type of Sale (Asset or Stock); Equipment Sold
• Expected Closing Date, Conditions
• Financing
• Real Estate
• AR / AP
• Non-Compete
• Post-Closing Issues (indemnification, obligations)
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33. Sales Contract
Asset Purchase Agreement
• Typical, usually Buyers prefer
• More complex than Stock Sale
• Purchasing Assets of Business, not Liabilities
• Parties Choose which assets transfer
• Valuation of Assets important
• Transferred by Bill of Sale
• Capital gains on Assets? Tax Issues for Seller
• Will need new legal entity to accept assets
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34. Sales Contract
Stock / Membership Sale
• Easier, usually Sellers prefer
• Purchasing Business Directly
• Buyer Assumes all Assets and Liabilities
• Business keeps all current contracts
• Insurance, CMS, etc .. .
• Move assets out of business PRIOR to Transfer
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35. Typical Areas of Concern
• Valuation & Tax issues (Accountant, Bankers)
• Financing (owner, lender, or mix)
• Real Estate (keep or sell)
• AR (purchase, collection, pay out)
• Patient Records & Transition
• Non-Compete (up to 5 years)
• Indemnification (tail, prior acts)
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36. Real Estate
• Opportunity for Continuing Income
• Brings Flexibility to Price
• Long Term Lease
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37. Exit “Off” Ramp
• Decide - What Do You Want?
• Prepare
• Records and practice assets cleaned up
• Real Estate
• Bring on Associate or Use Broker?
• Consult with Legal, Accounting, Finance Team
• Valuation
• Method of Sale
• Retirement - Post Close
• Review offers and transaction
• Close - Collect $$$$$
• Sale off into Sunset .. . .
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38. Thank You
Questions?
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