There have never been more resources available to doctors looking to sell their practice.  With the rise of the DSO and the speed of consolidation picking up many people have decided to enter the world of dental deal-making.  This has made for a very murky environment for doctors looking to find proper representation when exploring options to partner with a DSO or sell their practice.  As with any maturing industry or market it is common to see new entrants into space.  The dental market is no different and we are regularly seeing new DSOs emerge as well as new professional and support service companies enter the space.  Working in a rapidly changing and maturing environment can be challenging and it’s important to be as diligent as possible when selecting partners for your business.  Choosing the wrong accountant, the wrong practice management software, or the wrong supplier can be detrimental to you as the practice owner/operator.  When deciding the next phase of practice whether it be a sale to a private dentist or a partnership with a DSO it is important to understand the landscape of resources available to you.

Historical

Up until the early to mid 2000’s dentists had one option in selling their business and that was to another dentist.  Generally, a selling dentist would rely a on regional practice broker that had very specific knowledge of all the doctors in the market and who was looking to purchase a practice or become an associate with intent of buying out the existing doctor.  There is a very large number of experienced dental brokers out there and they are the best suited for doctor-to-doctor transactions because they understand the landscape of the region and create great connections.

With the rise of DSOs many of the traditional brokers have had to sell practices to a new type of buyer (DSOs).  Selling a practice in a doctor-to-doctor deal is very different than selling to a Private Equity backed DSO.  Private Equity backed DSOs have teams of financial analysts and attorneys to evaluate deals, provide offers, and create complex structures.

Asking The Right Questions

The skills and qualifications required to properly represent a doctor that is interested in DSO partnership are not easily obtained.  It is important to consider the following when choosing an advisor:

• What is your experience with selling practices to DSOs?
• How many deals have you closed?
• How many different buyers have you worked with?
• Do you have an in-house analytics team working for your clients or do you outsource?
• Analytics team (outsourcing analytics is not in sellers’ best interest)
• How familiar are they with Private Equity firms backing DSOs in the space?
• Are you compensated by DSOs for bringing your clients to them?
• How many past clients that sold to DSOs can you introduce me to?

State of the (M&A Advisor) Union 

New entrants have been flowing into the space and therefore it is imperative that doctors looking to transition do their diligence!  We have seen several bad actors in the space that are attempting “roll up” a group of dentists to maximize the valuation or the “multiple” that they would receive in the sale to a DSO.  These individuals possess zero experience in the buying or selling of businesses in the PE environment and they have left a wake of unfulfilled promises to doctors.  Additionally, there are many consultants in the space who are simply trying to monetize their rolodex of clients. Often, they’ll ask you to sign up for a specific program or ask you to sign a contract with several promises around purchasing your practice or partnering with their “DSO”. They promise equity in their organization and often it is never realized. Hiring an advisor who exclusively focuses on representing dental practice owners in a sale is your safest and most rewarding option.

There is only one way to maximize the value of your business and that is to run a professional marketed sales process to fully explore the market.  The number of buyers has never been greater, and the range of quality has never been broader.  It is easy to get caught up in the feverish pace of consolidation, but a formal process will require a substantial time commitment from the seller and an experienced advisor to navigate the process.

Hiring the correct representation to sell your practice means more today than it ever has. Ask the right questions, do your diligence, and make the best decision for the business you’ve spent your life building.