Volume 91: COVID-19 PRACTICE SALES UPDATE
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.
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.
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.
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: firstname.lastname@example.org
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