The values of dental practices, rather like share prices currently, are in heady territory. Values have escalated significantly in the past ten years, largely driven by corporate acquisitions, arguably inflating values to unrealistic levels. Whilst the price of your business will be driven by market forces, and we cannot be certain that this inexorable increase will continue, it would most certainly be prudent to review your business partnership insurance and implement an up-to-date and suitably worded cross-option agreement to ensure that your family or estate is not disadvantaged in the event of premature death. With borrowing harder to come by than ever, it may not be possible to achieve full and fair value for your business in the event of a forced sale, and the bank may not share your estate’s valuation of the practice in the event that the surviving partner wishes to purchase the deceased partner’s share.
A partnership life insurance policy, an appropriate trust as well as a properly worded cross-option agreement should ensure that the surviving partner, or partners, are able to buy the deceased partner’s share, thus retaining control of the business whilst, at the same time, adequately compensating the deceased partner’s widow or widower. I suspect that many partnerships have not reviewed either their levels of cover or their agreements for many years and, with the significant escalation in values, both the figures and contractual details could be considerably out of date. For a reassessment of your partnership insurance and cross-option agreements, please contact us at your earliest opportunity. If you would like a professional valuation of your business, then we can introduce you to a suitably qualified and experienced valuer. Henry Perlow and Company, for example, are a long established specialist valuer in this sector and we would be pleased to introduce you to Robert Miller or Lesley Sibley for the appropriate advice and guidance in the first instance.
One of our orthodontists recently agreed to sell his business to a Corporate. I use the word ‘recently’ loosely as, after months and months of protracted wrangling and haggling, he gave up and decided to retain the practice and implement such changes as would enhance future profitability. In a forced sale scenario, this would not be an option!