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Volume 91: COVID-19 PRACTICE SALES UPDATE

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I know we have all had enough of Covid-19. I promise not to speculate on the future (nobody knows anyway) or get stuck talking about the number of cases, Canada vs. the U.S., or anything else “generic” about this horrible pandemic. I will, however, take the chance that you are interested in real-life stories about what is happening in the market for what is likely one of your most valuable assets. 

Just like your business, our business came to a grinding halt in mid-March. All the deals we were working on were put on hold. Valuations were re-scheduled. Banks stopped funding all but the overly-secured deals which is understandable. Everyone went into crisis mode and we discovered Zoom! We have had deals fall apart, people pull listings because their nest egg was badly eroded, people put their practices up for sale for health reasons or out of fear, and sadly, we had to help one family deal with a practice sale due to a Covid-19 related death of a dentist.

As the weeks and months went by, the uncertainty started to wane and people started to make forward-looking plans again. The cases below are actual deals and timeframes so you can see what has happened in the market thus far and make your own predictions of what this all means for you.

Case #1

This was a very good practice that billed over $1M with a large patient base in central Toronto. However, it had a bad lease with a demolition clause. Showings were scheduled in mid-March either by a virtual tour or safe showing. By the end of March, 5 offers were received. The vendor decided to accept the offer of a neighbouring dentist who paid a nice premium, but it was not the highest offer. The transaction was originally scheduled to close in early July, but closing was delayed to the end of July. There were no adjustments to the price or terms. The vendor also voluntarily deferred some associate compensation to assist with transition cash flow. Both sides are extremely happy with results.

Case #2

A nice associate driven practice in its own building in a small town was listed in mid-March. A decision was made to hold off on showings until mid-May due to Covid. The showings were done in both a safe manner as well as by video link. Multiple offers were received at the end of May and the vendor elected to go with the highest offer. At this point, practices had not reopened so there was language dealing with closing being determined based on the reopening date. The purchaser offered a pretty high premium to the combined value of the practice and the building. However, there was difficulty in getting financing approved at that level so a price abatement of about 3% was agreed to by the parties. The buyers were also required to inject some cash to cover part of the premium. This financing process took the better part of 2 months which is uncharacteristic of the banks under normal circumstances and can be attributed to Covid. Currently, we are waiting for the completion of inspection reports and expect the deal to close in September.

Case #3

This scenario involves a very well established practice in its own building in a mid-sized town less than 1.5 hours from Toronto. The practice was listed in early July, and safe showings occurred in mid-July. Multiple offers were received. The vendor selected the highest offer by a very narrow margin which was a nice premium to the appraised value. Due diligence is underway presently and the legal documents have been drawn up. The vendor and purchaser have met multiple times and are working towards the original closing date of October 1st.

These are just a few examples of practice sales that illustrate what has transpired thus far. Clearly, the sky is not falling. Patients are coming back and many clients are reporting unprecedented demand likely caused by the 3 month shutdown. We have been fielding numerous calls from people who “hear” that practice values are falling. That is simply not true. Dentistry is a very profitable healthcare profession/business that is somewhat recession proof. The DSO’s (Dental Service Organization’s) exist to capitalize on the profitability of dentistry. Individual dentists are well-advised to think that way too. There is no question that our world has changed, but there are still plenty of opportunities to prosper and be fulfilled in dentistry.

David Lind is a Principal and Broker of Record 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

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