Due diligence on an orthodontic practice

Due diligence on an orthodontic practice is largely an exercise in verifying a backlog you cannot see all at once and a referral base you cannot easily test before closing. Financial statements alone will not tell you whether the treatment-plan contracts you are inheriting are healthy or whether the referral relationships feeding new starts will survive the change of ownership. The work under a signed letter of intent is to convert what the seller has told you into records and confirmations you can actually verify, before the conditions in your agreement expire.

The backlog schedule is the document that matters most

Request a full schedule of active treatment-plan contracts broken out by patient, by treatment stage, by amount billed to date and by amount of clinical work remaining. The figure to focus on is the gap between billing and treatment completed — a practice where billing runs well ahead of the work delivered is handing you an obligation to finish paid-for treatment on margins that may already be spent. Cross-check a sample of individual charts against the summary schedule rather than accepting the aggregate numbers as given, since discrepancies here are one of the more common places a seller’s own records turn out to be less current than represented.

Verifying the referral base, not just hearing about it

Ask for new-patient origin data by referring dentist over at least the past two to three years, and look at how concentrated the volume actually is. A seller’s description of "strong referral relationships" means little without the underlying numbers, and a handful of offices producing most new starts is a materially different risk profile than volume spread across many. Where practical, a direct conversation between you and the largest referring offices, arranged through the seller, is worth more than any document — it tells you whether those relationships are personal to the seller or genuinely transferable.

Confirming your own registration is actually on track

Your specialty registration status is itself a diligence item, not just a closing condition to assume will resolve itself. Confirm in writing with your provincial college where your application actually stands, and treat any uncertainty here as a reason to extend your conditional period rather than push toward a closing date that assumes an approval that has not yet happened. This is the single most common reason a signed orthodontic practice deal fails to close on the schedule both sides expected.

Equipment, software and lab arrangements

Have someone technical test whether the practice’s case-tracking and imaging systems, including intraoral scanner and cephalometric record archives, will actually transfer and remain usable under your ownership, rather than assuming compatibility — a migration that looks straightforward on paper can surface licensing or data-format problems only once someone actually attempts it. Where the practice runs an in-house lab, check the age and service history of fabrication equipment; where it outsources, confirm the lab agreement’s terms and whether it needs the lab’s consent to assign to a new owner. Either arrangement can hide a near-term capital cost or a service disruption that only becomes visible once someone actually tests it.

Corporate, lien and college-standing searches

Run a corporate search on the practice’s professional corporation and a lien and execution search against both the corporation and the selling orthodontist personally, to confirm there are no undisclosed claims that could attach to the assets you are buying. Confirming the seller’s own college standing — no active discipline or restrictions — protects you from inheriting reputational fallout tied to the practice’s name or location, and it is a search worth running even when nothing about the seller suggests a problem. Where the practice holds a lease, ask for the current landlord’s estoppel confirmation and review the lease’s assignment and consent provisions early, since a landlord who is slow to consent can hold up a closing date that otherwise has nothing left to resolve.

Findings that should stop or reprice the deal

Three findings are worth treating as serious, not routine: your own registration cannot realistically be secured before the closing date you need; one or more major referring dentists indicate they intend to redirect referrals once ownership changes; and the backlog turns out to be materially more billed than treated relative to what you were shown before the letter of intent. Any of these justifies renegotiating price, restructuring the deal with a holdback tied to collections, or walking away — and finding out before closing, rather than after, is the entire point of this process.