back-to-top
X

CONTACT US







hamburger-menu-icon

Articles

Volume 54: Mergers are a Viable Option

Download the PDF version now!

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: david.lind@ppsales.com

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead

celebrating-30-years
test
SUBSCRIBE TO OUR NEW LISTINGS SERVICE