A healthy percentage of my clients, I’d estimate somewhere around 30%, hire me or start negotiations with a seller of a dental practice a little bit like Russell Crowe in Gladiator. On calls I can hear them metaphorically preparing to go into battle with the seller. Strapping on a breastplate, testing the sand of the battle arena between their fingers, and tossing their razor sharp sword from hand to hand to test its weight as they hop up and down, prepared to run into the arena to do battle with the seller who they’re certain is just sitting on their pile of money scheming of ways to screw the buyer.
If you assume this is how your dental transition is going to go, 99 times out of 100, it’s a giant mistake.
I have four reasons why, but before we get to those I think it’s worth understanding the mentality of people who are prepared to fight instead of collaborate. Some people have just been through some traumatic experiences either in the business world or their personal lives, and they’re a little more wary than others. Others come from a culture where trying to put one over on the other person in a business transition transaction is seen as normal and “just how business is done.” If you’re buying a practice in the US, this mentality can get you into a lot of trouble and will almost certainly NOT be to your advantage.
I think those people are imagining a scenario where the seller of a dental practice tries slipping in fine print on page 47 of the asset purchase agreement something that says “notwithstanding anything else in this agreement, buyer shall pay seller an amount in cash double the price on page one.”
The buyer fears no one will notice, everyone will sign the contract, they’ll get to closing and the buyer will hand the seller a check for the agreed price to which the seller will say “no actually on page 47 it says you have to give me twice this amount.” The buyer imagines going to court and the judge will say “well this is mighty weird but a contract is a contract so here’s your money.”
If you’re worried about this, rest assured. It’ll never happen. Here are four reasons why:
- Most dental acquisitions are fairly collaborative, friendly endeavors. The buyer is buying a business that she likes, and working with the seller to make sure the business is as good as possible. Everyone is working hard to earn each other’s trust and each party tends to try to win points by saying things like “Hey, we noticed that this formula would underpay you” or “I noticed the light bulb in this operatory just went out and replaced that for you.”
- All the parties involved in a dental transition have huge incentives to catch tricks. The buyers, sellers, banks, and CPAs are all looking at things at various times and ticking things off checklists. The lawyers are paid big money to read the contracts and look out for tricks.
- Even if the sale of the practice is a one-shot deal for the seller, who ostensibly disappears, everyone else involved in the transition sticks around. And most of those people are repeat players in the dental transitions industry. Lawyers, banks, and accountants like Dental Buyer Advocates do a lot of acquisitions. They have a reputation to uphold. If someone tried something tricky like this, everyone else in the industry would immediately hear about it and probably blacklist that person or company.
- This is not legal advice, but is a broad generalization: If there is something tricky in a legal document there’s a decent chance that a judge will say “Oh come on, that’s a trick, you can’t enforce that,” and the trickery won’t work. Judges are people too and they don’t like to see others obviously being taken advantage of.
At this point, the tenaciously cynical buyer typically objects with a story from a friend or somewhere they read on Facebook about some disaster when someone DID get screwed. And let me be clear, I have seen situations where sellers absolutely took advantage of a buyer. But they’re less than one in a hundred.
Do bizarre or unethical situations happen? Yes, absolutely. But that’s why you have a lawyer, AND an accountant, AND a banker. They’ll worry about the fine print so you don’t have to.
On a strictly statistical basis, when you go into negotiation with an adversarial mindset ready to do battle, the seller and their team will pick up on that and likely fight back harder and make your transition a lot worse of an experience. You stand to kill a lot of goodwill by treating your dental practice purchase like a fight with the seller.
The whole purpose of the legal documents (that you have a dental specific, flat fee transitions attorney draft for you) is to protect you against trickery and make it possible for you to sue the seller if someone takes advantage of you. My advice: go into the transition with the mindset that the seller is looking to have a fair and equitable transition with the buyer they get along with personally and hope will continue their legacy of success.
Don’t negotiate simply to negotiate—negotiate to find a win-win. Protect yourself well with a dental specific, transitions-focused attorney and accountant, and you’ll be a lot happier both throughout the process and after you own the practice.
