Financial Due Diligence


“The Samera team is a seasoned player in providing a due diligence service to buyers of dental practices. Our experts have combined the experience of over 20 years in buying, selling and setting up dental practices. We understand the business of dentistry implicitly so we can help you in assessing all the financial aspects of a dental practice.”

Arun Mehra


Our approach is rigorous yet realistic, as not all dental practices financial management systems are the same. We request key information in the form of checklists, and then run through all aspects of the target practice financials in detail.

We provide support in reviewing all financial and tax records, system reviews and overall business assessments.

As dental practice owners ourselves, we have extensive knowledge of dental practices and the issues they face. We know the areas to look for problems and, of course, we know the right questions to ask.

Click here to read our article on Dentist and Dental Associate Expenses Guide

Our Checklist

If you are an individual or represent an organisation that is considering a deal then you need to ensure that you thoroughly check all the assumptions that you are making in that deal.

Financial due diligence can provide peace of mind to buyers, by analyzing and validating all the financial, commercial, operational and strategic assumptions being made.

It can utilize past trading performances to form a coherent view of the future and confirm that there are no potential pitfalls involved in any transaction.

The key components of financial due diligence in any acquisition of a dental practice are investigating, verifying and understanding:

  • The financial affairs of the target practice, including valuations
  • The market the practice operates in
  • The commercial sustainability of the business
  • The operational structure, including internal processes and systems
  • Any synergistic opportunities or savings arising out of acquisition
  • A sensible deal structure

Due diligence can also provide the framework for constructing a realistic strategic plan for the newly acquired business by highlighting and commenting on any inherent weaknesses or strengths, as well as identifying potential opportunities for new growth or exploitation of new markets.

Samera is a fantastic team, and always had a good experience every time I reached them.

Five stars

Due Diligence with Samera

Set out below are the areas to be covered in the financial due diligence investigation report in relation to the proposed acquisition of the shares of the Target. The information below is to be prepared for the last two financial years and for the period to the latest available management accounts.

Description of the Business
  • Discussion and understanding of the business activities;
  • Commentary on the registration with CQC;
  • Summary of the premises from which the business operates.
History and Background
  • An understanding of the history of the business and the vendors;
  • Identification of key aspects of the development of the business;
  • A review of the historical accounts and explanation of the key changes in financial performance.
Income and Revenue
  • An analysis of income by:
  • Location/Site
  • Type (to include, Fee per item (with a breakdown of specialist), Plan, NHS, Sundry)
  • Principal/Associate/Hygienist
  • Details of any fee/rate increases applied during the last financial year and the period to date.
  • Details of the method of allocating fee income within the profit and loss account and the appropriateness of the method adopted;
  • An overview of the NHS contract(s);
  • Analysis of UDA/UOA performance and rate (for the last five years), together with a review of the recognition of under performance and monies clawed back;
  • Verification of income to DPB Statements, including review of patients’ charges, remissions and superannuation deductions;
  • Analysis of the number of “live” patients over recent years (where available);
  • Summary of treatment charges.
Expenditure – Direct Costs
  • Material costs and benchmarking;
  • Review of suppliers and key terms and rebates;
  • Laboratory costs and terms;
  • Provision of sufficient data for you to be able to determine synergistic benefits.
Expenditure – Staff Costs
  • Details of current number of staff/associates, type of “employment”, job title/description, qualifications, hourly rate/salary, associate rates, overtime rates, holiday entitlement and arrangements, sick pay, long service awards, length of service and any other benefits;
  • Consideration of the timing and impact of pay reviews;
  • Consideration of locum usage;
  • Details of all ancillary and administrative staff functions, and details of anticipated recurring cost for this;
  • Details of the roles that the current owners (and family) fulfil in the Company, and the potential cost of filling these roles where required;
  • Comparison of actual payroll costs to expected costs calculated by reference to the above analysis.
Expenditure – Other
  • A review of the detail within the profit and loss account of the business for the last two financial years, together with latest management accounts, commenting upon changes and trends within these accounts;
  • Comparison of actual fixed and variable costs to expected levels and consideration of costs included in the historical nominal ledgers;
  • Identification of: professional fees; audit and accountancy; repairs and renewals; equipment hire; finance costs; and other possible non-recurring costs incurred by the current business;
  • Identification of costs relating to the vendors that might not be on-going and analysis of costs required on an on-going basis, to include amongst other things rent and other property costs.
Balance Sheet
  • A review of the balance sheet of the Target at the dates of the last statutory accounts and the latest management accounts;
  • Comment on any unusual or non-trading items; any significant off balance sheet items and intangibles;
  • Fixed assets:
    • Analysis by type and location;
    • Basis of valuation;
    • Depreciation rates;
    • Detailed fixed asset register including values.
  • A review of the debtor balances (trade and other) included within the historical accounts, commenting upon ageing provisions against receivable, policies in relation to invoicing and

agreement of client funding, etc.;

  • A review of the stock balances included within the historical accounts commenting upon the ageing of stock and the appropriateness of the figures included within the accounts;
  • Summary of creditors (trade and other) and its constituent parts, together with an analysis and commentary thereon;
  • A review of assets held under finance leases and other financing arrangements;
  • A summary of other assets and liabilities, including a review of unusual items and significant fluctuations;
  • Analysis of provisions and an assessment of liabilities, litigation and claims;
  • Comment on any balances owed by or to the vendors or associated entities that will require consideration as part of the deal structure.
Cash Flow

A detailed analysis of working capital movements and trends, and reasons for cash movements in historical accounts.

  • Review PAYE/NI liabilities, enquiry/inspection visits and most recent correspondence;
  • Consideration of whether the business is or has been registered for VAT, together with Enquiries/inspection visits and recent correspondence;
  • Analyse the corporation tax computations since the date of incorporation (or the last six years, whichever is the shorter) and comment on the corporation tax status of the company, including a review of any investigations by HMRC (if applicable);
  • Consideration of elections and tax planning exercises carried out by the target;
  • A review of “tax sensitive” categories of expenditure within the company, to highlight any potential liabilities;
  • Review of incorporation documentation (if applicable) to include GDC approval of Company Name.
Insurance Cover
  • Summary of the policies held by the business;
  • A summary of the levels of cover held in order that the acquirer and their broker may assess their likely on-going cost and actions required post completion.
Systems Review
  • Identification of key reports prepared by management and operational staff;
  • Discuss accounting and practice management system with management. Key areas include:
    • New patient procedures
    • Income recording and recognition process
    • Expenditure recording and recognition process
    • Wages and salaries (including self employed individuals)
    • Cashbook
    • Petty Cash
    • Nominal Ledger
    • Computing system and software packages

To learn more, check out our article on financial due diligence here. You can also listen to our podcast episode on the legal issues to consider when buying a dental practice here.

If you want to find out more about due diligence when buying a dental practice, book a free call with us today. We will explain the process, what you need to do next and how we can help.

Dental Accounts & Tax Specialists

As dental practice owners ourselves, we know what makes a clinic tick. We have been working with dentists for over 20 years to help manage their accounts and tax.

Whether you’re a dental associate, run your own practice or own a dental group and are looking to save time, money and effort on your accounts and tax then we want to hear from you. Our digital platform takes the hassle and the paperwork out of accounts.

To find out more about how you can save time, money and effort on your accounts and tax when you automate your finances with Samera, book a free consultation with one of our accounting team today.

Dental Accounts & Tax: Further Information

For more articles, webinars and blogs on dental accounts check out the dental accountancy section of our Learning Centre and follow us on YouTube, Facebook and Instagram.