A key and sometimes lengthy period for any vendor is the due diligence period. This Blog concentrates only on Legal Due Diligence from a vendor’s perspective. Vendors need to be ready for numerous queries from purchasers or their lawyers/brokers/accountants/financiers/valuers. Vendors should be pro-active and transparent in the early preparation of a detailed package containing all requisite information and material to facilitate the sale which progresses to the drafting of the practice sale agreement. This will speed up the sale process and can enhance the value of the practice.
Due diligence materials normally provided to a vendor’s lawyer are:
the current lease and disclosure statement;
all employment agreements and full details of all employees of the practice and their status as to entitlements including their period of service, hourly rates of pay, hours worked per week, long service leave, accrued sick/carer’s leave and holiday leave entitlements;
all contractor agreements and full details of all contracting assistant dentists, dental hygienists and dental therapists;
up to date financials;
town-planning permit or other evidence as to permitted use and any licenses or consents attaching to the clinic;
details as to vendor entities ie who owns the goodwill, the plant, the equipment, the stock;
price allocation between goodwill, plant, equipment and stock and is the stock included in the sale price;
list of plant and equipment included in the sale and details of all hire/lease encumbrances over the plant and equipment;
details of any business names, trademarks, logos, domain names or other intellectual property attaching to the clinic;
all on-going material contracts and service arrangements, including utility contracts, which are to be transferred to the purchaser;
details of any pending and potential legal proceedings against the practice or the vendor
The sell side due diligence process is sometimes misunderstood and often seen as an irritation. It is advisable to be cooperative and supply all relevant information. This can result in fewer surprises during the sales process thereby increasing potential buyers’ confidence and hopefully increasing the quality of bids. However, too often we see at Whitehead Legal that complete due diligence information is only provided after a heads of agreement is entered into and delays can then ensue to properly coordinate the sale documentation. Our Whitehead Legal Due Diligence Compliance Checks should not only discover any issues, but also assist and manage solutions to any issues.
Watch our Blogs for commentary on Town Planning Permits and Employee Entitlements