As a dentist, you pour your heart and soul into your practice after a grueling educational path. You balance three vital roles while helping improve lives: Clinician, manager, and entrepreneur.
So, what do you do when an unsolicited offer for your dental practice comes along?
Although every dentist has a reason to leave the profession, in recent times, it’s more likely that you’ve considered finding an exit ramp so you can enjoy the next phase. And why not? You’ve built value for your patients, employees, community, and family.
You may even be more tempted because you received an unsolicited offer to sell in the last year. If your practice produces over $1 million annually and represents a well-run brand, your practice is on the radar of Dental Service Organizations (DSOs) and Private Equity Groups (PEGs). They’re aggressively looking for practices to buy, and they’d like to entice you with an offer that puts cash in your pocket.
An unsolicited offer will rarely be the best offer.
The corporate entities know the numbers and often look for reactive buyers ready to make an exit move. If you take their offer, you face two problems. First, you’re guaranteed to give up some of the profits you deserve. You built the practice, and the maximum market value belongs to you. But unsolicited offers don’t usually come with your best interests in mind.
Second, you may miss vital details until it’s too late. DSOs generally require the selling doctor to stay in the practice to earn part of the value. If the new owner, your boss, doesn’t value culture or isn’t willing to invest in the practice, you may finish your career in frustration. You deserve a better finish than that to a productive career.
An unsolicited offer leaves questions unanswered.
A DSO deal can represent a tremendous opportunity for some sellers, but it’s essential to find the right fit for you. Dentists aren’t familiar with the new merger and acquisition landscape that’s poured into dentistry recently, and many PEGs use that to their advantage. Consider the objective and subjective layers of one of the most impactful decisions of your life. At a minimum, you want to know:
- How solid is the buyer’s balance sheet?
- Does the deal structure make sense for me? Will I ever see all of the money?
- Have all my earn-out and exit options been revealed?
- What type of culture will they bring into their (my) practice?
- Is my legacy and community safe in their hands?
- Is the legal language 100% clear to me?
- How did they arrive at the offered value, and is it fair?
The practice value represents the business you’ve built and impacts life’s next stage. It’s a number that deserves meticulous attention by someone other than a PEG or DSO. These entities include teams of CPAs, attorneys, and analysts focused on acquiring practices at the lowest possible cost. They’re skilled negotiators who tip the table in their direction.
A PEG has a clear exit plan that includes selling to a DSO for an excellent return. Part of that margin includes buying practices for less than market value, and they depend on finding sellers that will sell without due diligence. What seems like a good deal may be the worst-case offer. And consider how many composites and crowns you’d need to place to make up the difference.
An unsolicited offer opens a door.
Many of today’s dental CPAs and traditional brokers don’t understand the nuances of this fast-paced acquisition environment. Despite their best intentions, complex factors are woven into a market cycle that requires weekly evaluation and adjustments. Yet, with more money chasing fewer practices, opportunities abound for sellers that take a measured approach to holistic exit planning.
An unsolicited offer should be the starting point for a deeper conversation about your exit plan. It doesn’t matter whether you’re ready to transition or not; it’s an excellent opportunity to learn more.
Even if you’re not sure it’s time to sell, arm yourself with insights about today’s evolving market. Many dentists are surprised to learn that selling a few years earlier can net significantly more profits than waiting until later. Take time to run various scenarios with dental practice transition specialists so that you know what makes the most sense for you.
Get the answers for a profitable future.
At DDS Match, we specialize in working exclusively with you to help secure a buyer that fits your goals and vision for the future. In rare cases, an unsolicited offer may work out, but it’s far more likely you’ll leave tens of thousands of dollars on the table, if not more. However, with a thorough analysis of your practice, we can help you find the buyer willing to pay what you deserve.
Reach out and start the conversation today. We’re passionate about helping our clients enjoy the future they deserve, and we’d love to speak with you about your goals.
