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MediEstates - Sold STC – what happens now?
Sold STC – what happens now?


Sold STC - what happens now?


Hannah Burton explores the ‘subject to contract’ process.



Once the sale of a dental practice has been agreed, one of the most common questions I’m asked by both vendor and buyer is, “What happens now?” The answer is a series of steps which takes both sides through a process of fact-finding, negotiation, legal hoop-jumping and securing finance, which takes an average of six to nine months. This is known as the ‘sold subject to contract’ or ‘SSTC’ process and it continues right up to sale completion.

Meaning
A practice is classed as SSTC once an offer has been accepted and the buyer has signed terms and paid a deposit with their broker. This binds their client, the vendor, to a period of exclusivity and takes the practice off the market.

For the buyer, the first thing they must ensure is that they have ‘indicative terms’ from a lender that they will consider lending the required funds. This is based on the financial circumstances of the buyer and their business plan, and the financials of the practice in question. They may have acquired indicative terms already before making an offer, but it should ideally be in place before solicitors are instructed.

For the vendor, ‘heads of terms’ are drawn up which outline the sale and the headline terms such as the price agreed, a proposed completion date and top-line details regarding the property, staff and business in general. These are then signed by the vendor as a basis on which negotiations can proceed.

Into the detail
Now solicitors are instructed by both sides and the detailed negotiations begin. At the same time, the buyer does a formal application to their chosen lender to get their credit approved and starts to gather all their documentation for their application to the Care Quality Commission (CQC) to take over the running of the practice.

All three of these processes are detailed and require diligence and care on the part of the professionals employed to facilitate them. This is why it is recommended for both vendor and buyer to instruct specialist dental solicitors who understand the exact requirements of a dental practice purchase. Using a specialist dental practice broker means they can access help with their CQC applications. It is also advisable for the buyer to approach a lender who routinely lends for dental practice purchases as their understanding of this type of property often proves invaluable.

The aim of the due diligence process is to make sure every aspect of the practice has been set out and understood. The buyer’s solicitor sends a detailed questionnaire to the vendor’s solicitor covering both the property and corporate sides, which includes freehold or leasehold contracts, planning consents, business accounts, employee contracts and so on. At the same time, property and local searches must be carried out. There is almost always more than one round of due diligence questions and in almost every case, further enquiries which can result in having to update evidence that has already been sent as it is out of date. It can be a lengthy process depending on how organised the vendor is, which is the reason we advise them to be as prepared as possible.

Meanwhile, the credit team of the buyer’s chosen lender will carry out credit checks which can take about a week to come through. Once credit is approved, they will ask the buyer to instruct a chartered surveyor (a surveyor who has been accredited by the Royal Institution of Chartered Surveyors [RICS]) to carry out a ‘business/property if applicable’ valuation, which is an independent valuation of the business and/or property on behalf of the bank. It can take about 10 days for the report to be returned to the credit team who will then go through a process of approving the credit again.

About two months into the SSTC process, and not before as it can be rejected if the planned completion date is too far off, the buyer must submit their application to the CQC to take over the running of the practice.

Putting it all in writing
Once the buyer’s solicitors have completed their due diligence and their credit has been approved, they move on to drafting the ‘sale purchase agreement’. This is a document which sets out every single detail of the transaction, including the information gathered during due diligence and the terms and conditions of the sale. This document will go back and forth between the solicitors several times before all the details have been agreed and it can take a number of weeks.

Once this process is underway, the buyer will normally be asked to attend a CQC interview. To pass this, they must be firmly on top of their business plan and aware of their responsibilities in running a practice. Usually within a week of the interview, they will receive a ‘comfort letter’ which confirms that the CQC have no objections to them running the premises and that they will await final notification of completion.

To the surprise of many a buyer, once the sale purchase agreement has been agreed, the bank then instructs their own solicitors to review the due diligence, sale purchase agreement and lease if applicable at the buyer’s expense. In essence, they review the due diligence already done by the buyer’s solicitors in order to be satisfied that the loan will be serviced and paid off in time. Only with all these processes complete can contracts be exchanged.

Exchange and completion
Exchanging contracts and completing the sale often happens on the same day for fully private practices. However, if there is an NHS contract, another month long process is required for the NHS Variation Notice. Most NHS contracts are in a sole name and they cannot be transferred straight across. Instead, buyer and vendor must go into a partnership. On exchange, they apply for this and then are required to wait for a 30- day notice period. If no objections are raised in that time, then completion can then go ahead.

At exchange, the buyer pays a deposit of usually about 10 per cent of the sale value which gives security to both parties that the sale is going ahead. Then any final loose ends are tied up before they complete the sale and the property and/or business changes hands.

Smoothing the transition
It’s a long and complicated process full of many potential frustrations on both sides. This is where an experienced dental practice broker can really help. The SSTC process can seem a daunting prospect to both vendor and buyer at the start, but working with professionals who work with it every day can make everything run much more smoothly.
Posted by: Hannah Burton on

General Buyer Terms 

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Business
    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 1998. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
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