A common element of business transactions is the execution of a “Confidentiality Agreement” or “Non-Disclosure Agreement” (NDA). The agreement’s purpose is to ensure that confidential information about the business for sale is kept only by the purchaser who is buying the dental practice and the purchaser’s advisors for the evaluation of the purchase itself.
The NDA is between the broker participating in the transaction and the purchaser. In the case of a dental practice sale, the NDA will cover information such as the name and address of the selling doctor and practice, financial reports, data from the practice management system, staffing details, purpose of the sale, and a myriad of other pertinent pieces of information.
Are an NDA’s Demands Reasonable?
Recently, we have seen that some brokers have attempted to expand the authority of their confidentiality agreements. In one such instance, the broker stipulates that the client, who is buying a dental practice, is not to contact the owner, employees, suppliers or other brokers to review and evaluate a potential practice opportunity. It is certainly reasonable that the employees and suppliers of a subject practice are not to be contacted and that the broker should be the primary contact for all questions regarding the practice instead of the selling doctor.
However, if a broker misuses an NDA with the purpose of forbidding a purchaser from contacting another broker or steering them toward a particular broker, it is nothing more than an attempt to limit the ability of the purchaser to solicit counsel, representation, or advice on a major step in his or her career. There is simply no ethical rationale for this action.
Consult a Full-Time Dental Practice Transition Specialist
A reputable and experienced transition specialist and appraiser is most often the best person to evaluate the opportunity as a business. While an accountant (preferably with dental experience) can be a strong, contributory voice on a purchaser’s advisory team, a local broker with appraisal and valuation experience can provide vital insights and knowledge that may be missed by others.
A local broker can also be invaluable for the evaluation of the purchaser’s individual situation. The full-time transition specialist is the only professional on the team who works with dental practice transitions day-in and day-out and is therefore more capable of providing sound advice to the dentist buying a dental practice.
State Real Estate Laws May Apply
In many states including Florida, the sale of businesses, including dental practices, are regulated by the state’s real estate law and requires transition specialists to be licensed as agents or brokers to receive a commission for their services.
In Florida, Florida Statute (FS)475.01 governs real estate brokers. By law, a broker is any person who brings together two or more parties for the purpose of affecting a sale of a business or real estate property. This relationship implies that there is an expectation that the broker be compensated for his or her efforts and services.
Brokers have a duty to treat the public with honesty, integrity, and fairness. The public has the right to rely on representations of the Broker being accurate to the best knowledge of the Broker. Further, a Broker may only represent the seller or purchaser of a property, or the transaction as a whole (whereby no representation is established). They may only represent a transaction if both parties are notified, in writing, at the outset. The representation of both parties in a transaction, known as dual representation, is explicitly illegal in the state of Florida.
Whether you use representation or not, you have the right to representation as the party buying the dental practice or selling it. As a seller, this generally is stated in a listing agreement but may also be initiated once two parties have found each other. As a purchaser, a similar agreement for representation could be agreed on between you and the broker or agent.
If an NDA agreement is required to acquire information about an opportunity and that agreement states that you may not enlist an advisor or representative, attorney, accountant, broker or other, you should consider carefully whether the party requesting your signature is acting fairly by limiting your counsel. Additionally, any specialist who suggests that you should not retain legal or financial counsel should be questioned as to their motives and interests in presenting a fair deal. Our previous post, “How to Recognize Unethical NDAs When Buying a Dental Practice” can provide a more in-depth look at the components of an unscrupulous NDA.
Buying a dental practice or selling your dental practice may be the biggest step in your career. Ethical professionals will operate with the utmost respect in an up-front, open, and fair manner. Take advantage of the opportunity to work with those professionals, as they are the ones who are most interested in your continued growth and success.
Henry Schein Professional Practice Transitions, Inc. is a national leader in dental practice transitions. A subsidiary of Henry Schein, Inc. they provide expert guidance for selling and buying dental practices, assessing partnership and associateship opportunities, performing dental practice appraisals and valuations, and advising on dental practice management and fees.