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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. Understanding Practice Valuations

  2. What To Expect When Selling Your Practice

  3. The Chart Sale

  4. One Year Later

  5. Dealing with Unsolicited Offers

  6. Covid-19 Practice Sales Update

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

  8. Partnership Pitfalls

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

  10. Smaller Practice Realities

  11. Dental Market Update - 2019

  12. Creating Your Own Most Valuable Practice (MVP)

  13. Small Practice Economics

  14. The Market is Very Efficient

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

  16. Hygiene as a Value Driver

  17. The Value of a Good Team

  18. Is it Time to Move?

  19. Staging A Dental Practice

  20. The High Cost of Dying

  21. Deal-Busters

  22. Patients - Attract and Retain

  23. Should I Stay or Should I Go?

  24. Is There a Buyer for Every Practice?

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

  26. Smooth-Sale-ing

  27. Buying Time

  28. Patients, Patience, Patients

  29. A Real Patient

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

  31. Irrational Exuberance or The New Normal?

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

  33. Finding and Being a Mentor

  34. Bigger is Better

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

  36. How Well Do You Know Your Practice?

  37. Dave's Top Ten List for Vendors

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

  39. Your Premises Lease is an Important Asset

  40. What are Associates Thinking?

  41. There is Life Outside the GTA

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

  43. Mergers are a Viable Option

  44. Is Your Associate an Asset or a Liability?

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

  46. The 100 per cent of Gross Myth

  47. The Past, The Present and The Future

  48. Caveat Emptor

  49. Overpaid Long Term Staff

  50. Selling your Practice in Stages

  51. A Potential Pitfall of Selling Shares

  52. Value in Your Practice Through Balance

  53. Only Trusted Staff Can Defraud You

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

  55. Coping With A Large Patient Base

  56. Successful Dental Practice Transitions

  57. Taking Care of Business

  58. The Investing Dentist Phenomenon

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

  60. Organize your Debt in Order to Sell your Practice

  61. Having a Better Team

  62. How Do I Prepare My Practice For Sale

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

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

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

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

  67. Transition - What to Expect

  68. Discussion on Digital X-Rays

  69. Partnerships and Shotguns

  70. Strategic Planning - How to Get Started

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

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

  73. Matrimonial Practice Valuations

  74. Purchaser's Guide to Affording a Practice

  75. Location Improvements Throughout Your Career

  76. Small Practice Valuations

  77. Partnerships – The Best and The Worst

  78. Changing Location When the Opportunity Comes Along

  79. Visual Presentation of Your Practice

  80. Presentation of Charts

  81. Your Premises Lease Can Be Your Worst Enemy

  82. How to Select an Appraiser for Your Practice

  83. How Are Your Billing Ratios?

  84. It Pays to Invest in Your Tangible Assets

  85. The Importance of Separate Financial Statements

  86. Five Time Frame Levels to Sell a Practice

  87. 12 Suggestions to Safeguard Computer Data

  88. How to Buy a Visible Practice

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

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

  91. The Balanced Practice

  92. Will My Practice Be Saleable in The Future?

  93. Buyer Be Aware

  94. Excess Profit - The Second Key

  95. Patients and Profits are the Keys

  96. Plan Ahead

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