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Volume 92: Dealing with Unsolicited Offers

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Over the past several years, there has been a significant trend where buyers proactively make unsolicited offers to purchase dental practices. In most cases, these buyers are targeting larger practices and/or may include an owner who is willing to continue working. In almost every practice we sell, the dentist tells us about numerous purchasers who have expressed interest in purchasing his/her practice.

These buyers may include corporations (or dental service organizations), investor dentists, or individual buyers looking in the area. All of these buyers have different criteria of practice size, deal structures (partnership or outright sale), associateship offers, etc.

This trend has been fueled by a relative shortage of practices actively for sale, versus the high number of buyers. Further, if the buyer can put together a compelling offer and structure, there is never any competitive bidding, and the sale moves ahead. The other major reason for this trend is the overall demand and strong performance of the dental industry over time. Dental practice values have continued to rise, and with the oversupply of dentists, demand should remain very high well into the future. Therefore, dental practice ownership is highly coveted, provides above average returns for its owners, and has historically withstood economic, financial, and worldwide health crises (the market has even weathered the Covid pandemic).

The concept of an unsolicited offer has been around for a long time. An example is in the housing market. In high demand neighborhoods, purchasers will knock on your door, and make you an offer. In most cases, this process is unsuccessful, as the seller may not be interested in selling, or the offer isn’t appealing. In the case of residential real estate, most homeowners have a good idea about the value of their home, and what it would take to get them to sell. Despite low success rate, it is worth it for the buyers as it may expand the sales market, and there may be the opportunity where the offer meets the needs of the seller. 

This process is different from solicited offers, where a property or business is listed as being for sale, and is typically exposed to the entire marketplace, or sometimes involved in a more discreet type of private sale process. In these cases, there is preparation or staging, valuation and marketing to bring in multiple buyers, creating competition amongst bidders, for price, structure and fit. 

The difference between the 2 types of sales is that in an unsolicited sale, the owner did not initiate the decision to sell. What should you do if you get an unsolicited offer, and it interests you?

1. Don’t Rush. This is an exciting event. Someone who you didn’t know has specifically targeted your practice to buy, and you are curious to see the offer. Buyers may want a quick decision, and may include a time limit, and exclusivity. Since you didn’t start this process, you should be given the courtesy to consider it, review the market and your options. With the current market, if your practice is good today, it will have continued demand in the future when you are ready. If the fit seems good, a buyer will grant you the time to get prepared. Further, don’t feel bad if you want to negotiate or just say that you aren’t interested now.

2. Review your personal situation. Are you ready to sell, under what conditions, and is your practice ready to sell? This review includes having a financial plan, working plan, and maybe your practice has untapped potential or serious flaws that are reducing its potential value. Remember, when you own, you keep the investment or passive income which is typically 3-7 times higher than your return versus if you sold and invested the cash. 

3. Become informed about the market. You should seek independent representation to discuss the market and get a valuation of your practice. This analysis includes a market review, and practice review identifying any opportunities or flaws in your practice. More importantly, you should write your own story about how this process, and what structure will work for you. Do you want to keep working, slow down, have a partner, or maybe just walk away? 

4. Get to know the potential purchaser. What does the buyer see in you and your practice? Is this a good fit for your patients both clinically and philosophically? What does the buyer expect of you in the future?

5. Create competition. Because it was the buyer who initiated your interest in selling, you may feel a moral obligation to only work with that buyer. Even if the buyer has a seemingly perfect offer, or perfect structure, you will want to ensure that you have made the right decision for you, at the right price, given your future obligations and, with the right fit for your patients and staff. This is only accomplished by reviewing what the entire market can offer. Even if the buyer seems perfect, by creating competition, you assure yourself that you are getting true market value. 

In the dental industry many practices have been sold under this process, and generally the feedback from seller seems to be quite good. Despite this feedback, no one really knows what the actual value of the practice was, as there was no true market competition. The most important takeaway is about personal and practice preparation. We want you to be the driver of your process, and to do things on your timeline. Start planning now, develop a financial plan, prepare your practice, and when the time is right, connect with the right buyer that you choose!

Colin Ross is a Partner 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: colin.ross@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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