Dad’s Story…

In 2008, my father, a pediatric dentist from Montgomery, AL began the process of selling his practice.  Leading up to that decision to sell, my father worked diligently as a solo doctor each week for over 30 years to serve our city’s children to meet their oral healthcare needs.  Although the practice had a humble beginning in a small office park, he moved the business to a beautiful standalone building with a caboose on the front that served as a waiting room for the kids. 

Over the years his team and business grew and the practice.  By the time 2008 rolled around he was seeing second and even third generation patients. He employed 12 team members, and saw close to 100 children a day.  He took his team on cruises most years. The team loved the patients and the team loved (and still loves) him.  Lucky for me, I experienced the culture myself some summers working as an intern cleaning trays, pouring up molds, and attempting to bend and solder wire to make space maintainers.  I am certain dad lost money on me as an employee, but I always look back fondly on that time. I got to see my father, in his element, doing what he loved most.  His practice was a success by every measure: financially, culturally and clinically. 

But when it came time to sell the business, it was a challenge. 

Pediatric dentists were hard to come by.  The graduating classes from residency were slim and there were many years when none of the graduating residents were looking to move their family to Montgomery.  It was no fault of the business or my father. There were simply not enough potential partners or buyers for his practice.  My father ultimately found a fantastic partner who eventually purchased the practice from him. But, it took years to complete the transaction.  I am happy to share that my father, now in his 70’s, is happily retired from the practice. He spends time doing what he loves: traveling the world and popping by Charlotte on a regular basis to see his 4 amazing grandkids.  All is well that ends well.

That was 2008. 

What about Today?

If my father was looking to sell that same business today, the process would be a bit different.  In 2008, the buyer pool was rather limited: pediatric dentists, with a license to practice in the state of Alabama, who wanted to live and work in Montgomery and would qualify for a loan to buy the practice.   Over any given year, there may be 1-2 buyer candidates.

Today, the buyer pool looks a bit different.  I could connect him with a whole host of buyers, including:

• Over 150 IDSOs / DSOs / DPOs that are backed by Private Equity
• 100’s of Orthodontic practices looking to capture the referrals and build vertical integration in their business
• 1000’s of Dentist-founded and debt-funded groups
• 100’s Private equity and family funds looking for that one practice to acquire, learn from and grow into a leading pediatric group in the region
• Local pediatric dentists

He would be faced with more buyers offering higher prices than ever before (Remember Econ 101?  Increase demand, hold supply constant and prices go us!).  Likely, there would be a bidding war for his practice due to its history of success, size, and scale.

Valuations and Timing

In 2008, dentists did not have a lot of options when it came time to sell their practice. DSOs were just beginning to gain traction and close to 99% of all practice transitions at the time involved one doctor selling to another doctor.  Today, 25-30% of all practices are bought by a group, DSO or Private Equity Group.  Times have changed.  A lot.  The value of a dental practice has never been higher. 

At TUSK we sell practices that regional brokers still sell for 70% of collections for 150 – 200% of collections

• Sales that historically took brokers 3-4 years to sell, we are selling in 6 months (with a bidding war).
• Demand for dental practices far outstrips supply.

There is not better time to own or sell a dental practice.

Education and Transparency

Selling to a group or DSO is not for everyone.  As I shared, I am not sure my father would have sold to one even if he would have had the opportunity.  Frankly, I am rather agnostic on the matter of who a dentist decides to sell his or her practice to.  But I am adamant that every dentist who owns a practice should be aware of the market today and be informed about the wide array of buyers and prices that they are willing to pay. 

If you are thinking about selling your practice in the next 5 years, talk with someone who truly knows the DSO space – we are always happy to talk with you.  You deserve to know all of the options you have when it comes time to sell.  Oh, and if you receive an unsolicited offer from a group, DSO or PEG don’t take the offer, they are not the only group who is interested in partnering with you – I promise. 

Full Circle

I was lucky enough to spend a couple of days with my father at the President’s Cup this year in Charlotte.  We were hosting 50 of our dearest friends from the DSO industry at the tournament.  Dad got to meet the team at TUSK, private equity investors, former clients, attorneys, CPAs, Financial Planners, and consultants who all work exclusively in the DSO community.  He could not believe that there were so many wonderful people focused on ensuring that dentists maximize the value of the sale of their practice.  

Late one night, we were swapping stories about our experiences in the business of dentistry, and I realized that although he might have not gotten a return on employing me in his practice, it gave me exposure to the profession that I now love.  I am grateful to work with and for dentists every day and help them maximize the value of their life’s work.

As we walked the course at Quail Hallow, he shared with me how amazed he was at how much the industry, buyers and opportunities have evolved.  I shared with him that it is ever evolving now at a faster pace than even I could ever imagine.  I count myself as lucky to get to work in an industry that my father spent 40+ years of his life in.