Due diligence is the period in a dental practice sale when the buyer examines everything they have been told about the practice and verifies whether it is accurate. For sellers, it is the part of the transaction that most frequently causes delays, renegotiations, and — in a small number of cases — aborted deals. Understanding what buyers examine, why they examine it, and what problems they are looking for allows sellers to manage the process rather than simply react to it.
Due diligence in a dental practice sale falls into five main areas: financial, NHS contract, CQC registration, property and premises, and employment. Each area is conducted simultaneously, and the critical path is usually set by whichever workstream surfaces the most complex issues — most commonly the CQC registration transfer or the NHS contract novation. For a complete overview of the sale process, see how to sell your dental practice.
1. Financial Due Diligence
Three Years of Accounts and EBITDA
Buyers will request three years of accountant-prepared or audited accounts. The purpose is to establish financial trend rather than relying solely on the most recent trading year. A single strong year preceded by two weak ones raises questions about sustainability; consistent growth across all three years supports the asking price.
The financial DD process focuses on EBITDA — earnings before interest, tax, depreciation, and amortisation — as the baseline measure of trading profit. Buyers will apply their acquisition multiple to a normalised EBITDA figure, so the precise construction of that figure is the most commercially significant output of financial due diligence.
NHS Payment Schedules and UDA Delivery History
For NHS practices, the financial DD process extends beyond standard accounts. Buyers will request NHS payment schedules — the monthly contract value statements from NHS England or the relevant commissioner — for each of the three preceding years. These confirm the practice’s contracted UDA (Unit of Dental Activity) value and actual payments received.
Alongside payment schedules, buyers will analyse the practice’s UDA delivery history. Consistent delivery of 95% or more of contracted UDAs signals a stable contract in good standing; delivery below that threshold over multiple years indicates a pattern of underperformance that affects both the contract’s value and the risk profile of the acquisition. NHS England has the right to reduce contract values where sustained underdelivery has not been rectified — a risk buyers price into their offers.
Addback Scrutiny
Sellers typically present an adjusted EBITDA figure that includes addbacks — costs included in the accounts that will not recur under new ownership. Common addbacks include the owner-principal’s salary or drawings above a market-rate replacement cost, personal costs passed through the business, family members on payroll not performing genuine commercial roles, and one-off exceptional costs.
Every addback is scrutinised. Buyers will ask for supporting evidence for each line item and will challenge addbacks that cannot be substantiated. Unsupported addbacks are typically removed from the normalised EBITDA during negotiations, which directly reduces the offer price. Sellers should prepare their addback schedule with documentation before the process begins.
2. NHS Contract Due Diligence
Contract Documents
Buyers will request the original GDS (General Dental Services) or PDS (Personal Dental Services) contract, together with any variation or extension letters. The contract document confirms the contracted UDA value, the payment terms, the contract start date, the expiry or rolling arrangement, and any special conditions attaching to the specific practice or contractor.
Many GDS contracts are undated or held in incomplete form by practices. Where the practice cannot produce the original contract, a request to NHS England for a copy via the BSA portal takes time — often two to four weeks. This delay is avoidable if sellers locate and scan their contract documents before going to market.
Performer Register
Buyers will verify that all clinical performers working in the practice — including the selling principal and any associates — are listed on the NHS Performer List for the relevant NHS England region. A practitioner delivering NHS activity who is not on the correct Performer List creates a contract compliance risk. Any performers currently suspended, subject to investigation, or removed from the register require immediate disclosure.
Delivery History: The 95–96% Threshold
UDA delivery analysis is not merely a historical exercise — it determines the buyer’s confidence in the contract’s ongoing value. NHS England applies a “tolerance band” within which underdelivery is accepted; delivery below 96% (or the specific threshold set in the contract) in any year triggers the possibility of a clawback or contract variation. Buyers want to see delivery at or above 95% consistently.
Where delivery has fallen below threshold in recent years, sellers should prepare a clear explanation of the reasons — recruitment gaps, equipment failure, pandemic impact — and demonstrate that the position has been rectified. An unexplained or ongoing underdelivery pattern will either reduce the price or cause the buyer to insist on a deferred consideration structure tied to contract performance.
NHSE Correspondence and Clawback History
Buyers will request all correspondence with NHS England or the relevant commissioner over the preceding three years, including any contract performance notices, monitoring letters, breach notices, and clawback demands. A practice that has received no such correspondence is straightforward to assess; one with a history of contract management action requires more detailed review.
Outstanding clawback obligations — amounts owed back to NHS England for prior underdelivery — must be quantified and disclosed. Buyers will either require these to be settled before completion or adjust the purchase price to reflect the liability. Concealed clawback obligations that emerge after completion are a significant source of post-completion disputes.
NHS Contract Novation
The NHS contract does not transfer automatically on completion. It must be formally novated — assigned from the selling contractor to the buying contractor — by NHS England. The novation process involves submitting an application, waiting for NHSE approval, and updating the contractor details on the BSA system.
NHS contract novation is not a due diligence risk in itself, but it is a process timeline risk. Depending on NHSE workload and the complexity of the contract, novation can take four to twelve weeks after completion. Buyers and sellers need to understand how the practice will operate and how NHS payments will be received during the novation window. The SPA should specify arrangements for the interim period.
3. CQC Due Diligence
Registration Certificate and Inspection Reports
The Care Quality Commission regulates dental practices in England. Buyers will request the practice’s current CQC registration certificate, confirming the registered provider, registered activities, and regulated activities carried on at the premises. They will also review the last CQC inspection report and any follow-up correspondence.
A “Good” or “Outstanding” rating with no outstanding requirements is ideal. Practices with “Requires Improvement” ratings or outstanding regulatory requirements attract significant scrutiny. Buyers will want to understand the specific areas of concern, the actions taken, and whether re-inspection has occurred or is pending.
Notifications Register and Enforcement History
Dental practices are required to notify CQC of specified events including deaths, serious injuries, and safeguarding incidents. Buyers will review the notifications register maintained by the practice and cross-reference it with CQC’s records. A complete and well-maintained register demonstrates regulatory compliance; gaps or unexplained omissions raise questions.
Any history of CQC enforcement action — warning notices, conditions imposed on registration, or cancellation proceedings — must be disclosed. Enforcement action that has been resolved satisfactorily is generally manageable; undisclosed enforcement history discovered by the buyer after exchange is a material breach of the warranty provisions in the SPA.
CQC Registration Transfer: The Critical Path
The CQC registration of the selling provider cannot be transferred to the buyer. The buyer must apply for their own new registration to carry on regulated activities at the premises. This is the single most significant timeline factor in any dental practice acquisition.
CQC registration applications currently take between 12 and 24 weeks from submission to approval. In practice, most experienced buyers submit the CQC registration application within the first two to four weeks of exclusivity — which means the CQC timeline often determines the overall deal timetable. Sellers who are impatient to complete quickly and try to drive faster deal timelines without understanding the CQC registration window frequently create friction with buyers who cannot control that process.
Where the selling practice is operated by a corporate entity that is itself the registered provider — and the buyer is acquiring the shares of that entity rather than the assets — the CQC position is different: the registered provider entity remains the same, and the change of control must be notified to CQC rather than triggering a full re-registration. This is one of the reasons some dental acquisitions are structured as share sales rather than asset sales.
4. Property and Premises Due Diligence
Lease Assignment and Consent
Most dental practices operate from leasehold premises. Where the buyer is acquiring the assets of the practice (rather than shares in the entity), the lease must be assigned to the buyer. The assignment requires the landlord’s consent if the lease contains an alienation clause — which most commercial dental leases do.
Landlord consent processes vary. Some landlords respond promptly; others delay for weeks or months, particularly where the landlord has its own plans for the property or has concerns about the incoming tenant’s covenant strength. Sellers should make contact with the landlord as soon as heads of terms are agreed, rather than waiting until exchange approaches. Lease assignment is one of the more common causes of completion delays in dental transactions.
Remaining Term and Lender Requirements
Buyers who are financing the acquisition through a specialist lender will face minimum remaining lease term requirements — typically at least five years unexpired at completion, often longer. A lease with less than three years remaining at the point of sale will either need to be renewed before completion or will limit the pool of buyers to cash purchasers and those who can secure alternative premises.
Sellers with short lease terms should engage the landlord about renewal before going to market, not during the transaction. A lease renewal agreed pre-sale removes a significant buyer concern and supports a cleaner valuation.
Permitted Use and Dilapidations
The lease must confirm that the premises are permitted to be used as a dental practice. Buyers’ solicitors will check the use clause against the permitted use required for CQC registration and NHS contract compliance. Where the use clause is ambiguous or restrictive, a landlord waiver or lease variation may be required.
Dilapidations — the landlord’s claim for reinstatement of the property to its original condition at the end of the lease — are assessed as part of property due diligence, particularly where the lease term is running short. Where the practice has made significant structural alterations (dental unit foundations, X-ray room modifications, ventilation), dilapidations exposure can be material. Sellers should consider commissioning a dilapidations report before sale to understand and manage that liability.
5. Employment Due Diligence
Employment Contracts and Associate Agreements
Buyers will request signed employment contracts for all employees and signed associate agreements for all self-employed associates. Unsigned or undated contracts, missing contracts for long-standing staff, and informal arrangements that have never been documented are common findings and require remediation before completion.
Associate agreements receive particular attention because of their implications for the NHS contract and the practice’s ongoing clinical capacity. An associate agreement that terminates on change of ownership, or that contains no restriction on the associate working for or establishing a competing practice nearby, represents a significant risk to the goodwill the buyer is paying for.
Self-Employment Status Risk
The employment status of dental associates is an active area of HMRC scrutiny and case law development following the Supreme Court’s decision in Pimlico Plumbers v Smith and subsequent employment tribunal decisions in the dental sector. Where associates have been treated as self-employed but the working arrangements resemble employment — fixed hours, practice-supplied equipment, no genuine substitution right, exclusivity — there is a risk of HMRC reclassifying the relationship as employment for tax and NIC purposes.
Buyers’ solicitors will review associate agreements specifically for employment status risk. Where the risk appears material, buyers may seek an indemnity from the seller covering any retrospective HMRC assessment relating to pre-completion periods.
TUPE and Pensions
In an asset sale, the Transfer of Undertakings (Protection of Employment) Regulations 2006 apply automatically. Employees transfer to the buyer on their existing terms and conditions, and the buyer inherits all employment liabilities arising before the transfer date (subject to indemnity provisions in the SPA). The seller must provide the buyer with employee liability information at least 28 days before the transfer.
NHS pension membership for clinicians employed under the NHS terms creates a specific obligation for the incoming employer, who must be an approved NHS pension scheme employer. Buyers who are not already NHS pension scheme employers will need to apply for admitted body status, which takes time. This is a pre-completion action that buyers need to initiate early.
Data Room Preparation
The most efficient way to manage due diligence is to prepare a data room before the practice is marketed — an organised, secure document repository containing the key documents across all five workstreams. A well-prepared data room does not guarantee a smooth due diligence process, but it removes the most common source of delay: the seller scrambling to locate, copy, and share documents after the process has started.
Core data room documents for a dental practice sale include:
- Financial: Three years of accounts, management accounts for the current year, NHS payment schedules, UDA delivery history by year, addback schedule with supporting evidence, latest P&L and balance sheet
- NHS contract: GDS/PDS contract and all variation letters, recent NHSE correspondence, performer list extracts for all clinicians, contract performance reports
- CQC: Registration certificate, current statement of purpose, last inspection report and action plan, notifications log, DBS certificates for registered manager and nominated individual
- Property: Lease and all licences/side letters, landlord contact details, EPC, building survey if available, evidence of rent payments
- Employment: Signed employment contracts for all staff, signed associate agreements for all associates, organisation chart, details of any pending employment disputes, pension scheme details
For a full checklist and guidance on assembling a dental practice data room, see dental practice sale data room.
For a complete overview of the dental practice sale process from preparation to completion, see how to sell your dental practice.
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Frequently Asked Questions
How long does dental practice due diligence take?
The financial, employment, and NHS contract workstreams typically complete within four to eight weeks of the data room being opened. The CQC registration transfer is the most significant timing variable: new CQC registration applications currently take 12 to 24 weeks from submission. Buyers typically submit the CQC application early in the process so it does not delay exchange and completion. Total deal timelines in dental transactions are usually four to six months from agreed heads of terms.
What UDA delivery rate do buyers want to see?
Most buyers expect consistent delivery at or above 95% of contracted UDAs. NHS England’s tolerance band varies by contract, but sustained underdelivery below 95–96% in any year raises questions about whether the contract value is maintainable and whether clawback obligations exist. Buyers will model the practice’s value on the delivered contract value, not the contracted value, where there is a persistent delivery gap.
Does the NHS contract transfer automatically on completion?
No. The NHS GDS or PDS contract must be formally novated from the selling contractor to the buying contractor by NHS England. This is separate from the commercial completion of the sale. In an asset sale, the buyer must be a qualified contractor to hold the contract. In a share sale, the registered contractor entity remains the same and a change of control notification is made instead. Novation in an asset sale typically takes four to twelve weeks after completion.
What is the CQC registration transfer timeline?
In an asset sale, the buyer must apply for their own CQC registration — the seller’s registration does not transfer. Current processing times for new dental registration applications are 12 to 24 weeks from submission. This timeline is set by CQC and cannot be accelerated. Experienced buyers submit the CQC application as soon as heads of terms are agreed to prevent CQC from becoming the bottleneck at the end of the process.
What employment issues commonly arise in dental practice due diligence?
The most common employment due diligence findings are: unsigned or undated associate agreements, associate agreements that provide inadequate protection against the associate competing post-sale, potential misclassification of associates (employment status risk), missing contracts for long-serving staff, and NHS pension scheme complications for buyers who are not yet admitted bodies. Most of these issues can be identified and remedied before the sale process begins if the seller undertakes a pre-sale employment review.