Volume 54: Mergers are a Viable Option
There are many options to consider when contemplating the most effective way to transition out of your practice. The dictionary describes merger as the joining together of two or more companies or organizations. In essence, a dental practice is like a small company. However many dentists do not consider the merger as a viable option because they do not understand how it will work or the many benefits for both parties.
Prior to being in the Dental Practice Valuation and Brokerage business, I worked in the Healthcare Financial business with Newcourt Credit Group. Newcourt grew exponentially by consolidating several smaller companies and one that was quite a bit larger and was then itself acquired by CIT. I remember during one particularly robust period having 4 different business cards in the span of 18 months, yet I still had the same job! One of the most challenging aspects of all of this activity was dealing with the uncertainty and assuring our clients that we were still there to service them. In the end, the mergers were completed and our business changed to adapt, but at the core, our service to our clients remained the focus. These mergers were all done because we felt the combination of the businesses would provide a better platform for servicing our clients and a better opportunity for producing profit for our shareholders.
The same objectives apply in dentistry. If we can bring two (or more) practices together, and patients are provided with the same or better experience, while creating the opportunity to enjoy higher profits, then this is a viable option. This concept is particularly applicable to smaller practices that have gross revenues of less than $400,000 due to the fact that in general, these practices have higher relative overhead percentages. Consider that a practice that grosses $400,000 has: one receptionist, one assistant, a waiting room, at least two operatories that are equipped and probably a spare operatory for future growth, suction and compressor, a laboratory, sterilization area, darkroom with film processor, etc. We can merge this practice in to another practice that is close by that may have an under-utilized facility and room in the schedule. The benefits are as follows:
1. The Patient Experience. The most important factor in a successful merger is to be aware of the change that the patient is experiencing. They chose to be a patient of the merged dentist for several reasons and they are now faced with making another choice - do I want to continue in this new location or not? People do not like change and while this new location is a change, it is not as big a change as finding an entirely new dentist. Their first experience in the new location should be similar to their previous experience; the same recall card, confirmation process, receptionist, hygienist, dentist, payment terms and processes. The only change should be the location and the patients should see this change as positive because it may be easier to access, more modern or more convenient.
2. Reduction in overhead. The combined entity will have a physical plant that will have the best of each of the previous locations but will not have two of everything, nor will it be paying rent for two locations. Even if there is not enough room for both practitioners to be there at the same time, the facility can be used more productively by extending hours.
3. Staff Attrition. It will be very important at the beginning that the patients see the same faces in order to feel comfortable in the new location. Over time however, there will be opportunities as people move on, to create the right size team and salary savings will be realized.
4. Collegiality. Many dentists find it rewarding to have another dentist in their office with whom they can discuss a case or review a treatment plan. It is not necessary that both share the exact same approach to dentistry but it is critical that they share the same philosophy of patient care. This should be determined early in the process.
There are a couple of things to be aware of when considering this approach. Firstly, your premises lease; you don’t want to do this if you have several years left on your lease. The buyer may be willing to pay your lease for a few months but not a few years. The seller must be willing to stay for a while in order to transition the patients. Plan it well enough ahead so you will be in a position to stay for between six months and two years. Lastly, your team, particularly your receptionist and hygienist, will also be important to the successful transition. Ensure they are paid at market rates and are willing to adapt and go along with the plan.Selling a smaller stand alone practice can be very difficult. A well structured merger has proven to be a viable solution for many dentists.
David Lind is a Principal in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices. He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: email@example.com
The Professional Advisory
- One Year Later
- Dealing with Unsolicited Offers
- Covid-19 Practice Sales Update
- When is the Right Time to Sell Your Practice and Why?
- Partnership Pitfalls
- The Real Cost of a Dental Practice Set-up
- Smaller Practice Realities
- Dental Market Update - 2019
- Creating Your Own Most Valuable Practice (MVP)
- Small Practice Economics
- The Market is Very Efficient
- How Can Dental Practice Values be Rising and Declining?
- Hygiene as a Value Driver
- The Value of a Good Team
- Is it Time to Move?
- Staging A Dental Practice
- The High Cost of Dying
- Patients - Attract and Retain
- Should I Stay or Should I Go?
- Is There a Buyer for Every Practice?
- Good, Better, Best - The Market has Spoken
- Buying Time
- Patients, Patience, Patients
- A Real Patient
- Why Do a Practice Valuation? I'm not Selling
- Irrational Exuberance or The New Normal?
- Do dental equipment and dental technology affect a practice value?
- Finding and Being a Mentor
- Bigger is Better
- Dave's Top Ten List for Buyers (Vendors should read this too!)
- How Well Do You Know Your Practice?
- Dave's Top Ten List for Vendors
- What will happen to dental practice Values in the next 10 years?
- Your Premises Lease is an Important Asset
- What are Associates Thinking?
- There is Life Outside the GTA
- When Is the Right Time to Sell My Dental Practice?
- Mergers are a Viable Option
- Is Your Associate an Asset or a Liability?
- Has your Practice Facility Kept Up With Your Billings?
- The 100 per cent of Gross Myth
- The Past, The Present and The Future
- Caveat Emptor
- Overpaid Long Term Staff
- Selling your Practice in Stages
- A Potential Pitfall of Selling Shares
- Value in Your Practice Through Balance
- Only Trusted Staff Can Defraud You
- To Own or Not to Own Practice Real Estate? That is the Question.
- Coping With A Large Patient Base
- Successful Dental Practice Transitions
- Taking Care of Business
- The Investing Dentist Phenomenon
- Two areas to focus upon that could negatively impact the value of your practice
- Organize your Debt in Order to Sell your Practice
- Having a Better Team
- How Do I Prepare My Practice For Sale
- How Do I Prepare My Practice For Sale? Part 3
- How Do I Prepare My Practice For Sale? Part 2
- How Do I Prepare My Practice For Sale? Part 1
- Advice to My Son or Daughter Graduating from Dental School
- Transition - What to Expect
- Discussion on Digital X-Rays
- Partnerships and Shotguns
- Strategic Planning - How to Get Started
- Calling All Vendors - Practices have Gone Up in Value
- Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
- Matrimonial Practice Valuations
- Purchaser's Guide to Affording a Practice
- Location Improvements Throughout Your Career
- Small Practice Valuations
- Partnerships – The Best and The Worst
- Changing Location When the Opportunity Comes Along
- Visual Presentation of Your Practice
- Presentation of Charts
- Your Premises Lease Can Be Your Worst Enemy
- How to Select an Appraiser for Your Practice
- How Are Your Billing Ratios?
- It Pays to Invest in Your Tangible Assets
- The Importance of Separate Financial Statements
- Five Time Frame Levels to Sell a Practice
- 12 Suggestions to Safeguard Computer Data
- How to Buy a Visible Practice
- Why is there a shortage of good practices today?
- The Importance of Equipment in the Purchase of a Practice
- The Balanced Practice
- Will My Practice Be Saleable in The Future?
- Buyer Be Aware
- Excess Profit - The Second Key
- Patients and Profits are the Keys
- Plan Ahead