While every dental practice is unique and each sale has its specificities, the process can generally be broken down into the following stages:
As described in a previous blog, good preparation will greatly help the whole process go smoothly. This includes:
• Deciding what is important to you
• Making any change which might help boost the valuation of the practice
• Hiring the right advisors
• Getting your files and information in order, including producing a pro forma P&L showing what the EBITDA of the practice is (this is the measure of profit which is closest to the cash generated by the practice and is what most buyers use to determine the valuation)
Information: if you are working with an agent then they will prepare a sale brochure and information pack with what a buyer will need to make an offer. If you are doing this yourself, the key information is your historical accounts and the P&L to EBITDA mentioned above.
Meetings: based on the information above, you will get initial indications of interest from potential buyers and you can arrange viewings of the practice with them. These meetings should be a two-way process and you should be thinking about whether you can see yourself working with these people. Have questions prepared about the issues that are important to you.
Offers: you will then get offers from the interested parties. There are a number of important variables in these offers:
• Headline price
• Amount upfront
• When earn-out payments will be paid
• Under what conditions the earn-out payments will be made
• Minimum tie-in period
It is easy to just look at these numbers, however, you also need to look very carefully at the small print:
• What have they assumed about your costs? If, for example, they have reduced what is budgeted for material costs does this mean that they are going to change what you and your Associates can use? Or will they use this as an excuse to reduce the price later in the process?
• How have they calculated Associate costs? Is this how you do it? If not, what does this mean for what you and your Associates are going to earn in future?
• If these kinds of details are not given, then you need to ask for them. You should also consider why they were not more transparent. Were they trying to hide something or just give themselves room to chip you on price later on?
Selection: once you have clarity on the offers you have to choose which buyer you are going to go forward with. This is not just an economic decision however. You will normally be being asked to continue working at the practice for years more and this could be very painful if you don’t agree with how the practice is now being run. Most of our Principals regard their practices as their legacy. You want to continue to be proud of your practice and be able to look your team and patients in the eyes. We encourage sellers to speak to as many of our Principals as they would like to (some have spoken to up to eight of them). It’s important you know the reality of working with your new partner before you make this huge life choice.
Once you have chosen a specific buyer, they should draw-up a very detailed heads-of-terms which includes all the main aspects of the transaction. Get advice from your lawyers and accountants on this and consider the contents very carefully. It might seem attractive to just get this signed and move on but the buyer will expect the final documentation to be in-line with the heads.
You will typically grant the chosen buyer exclusivity at this point and agree to not talk to anyone else for a specified period. They will then send you legal and financial due diligence questionnaires. This part of the process can be quite painful. The better you have got things in order before you started the process, the easier it will be but you will be expected to produce a lot of information. If you can bring your practice manager in to help you with this then it will be a great help.
Given that the heads should cover most issues, we rarely find that the negotiation of the transaction documentation is a problem. One of the things that you should ensure when you speak to dentists who have already sold to the potential buyer is whether they try and move the goal posts at this stage. If they do, are they kind of people you want to be working with?
For us, the main determinant of timing of this stage is the CQC. So, this workstream should be prioritised.
I’ve written another blog on how to handle your team through the process but, in short, with the exception of the PM, we advise waiting until about two weeks before completion before telling the team. This means that they are informed and have time to process the idea of the sale but not too long to worry about it before they see the reality. We’d normally come in to meet the team the day after they are told. In this meeting we seek to give them additional reassurance, show them that we are reasonable people and answer any questions that they have. If you are doing an asset sale, then you need to consider the TUPE rules, which are in place to protect employees’ rights when they transfer to a new employer
For economic and personal reasons, you want the sale to be a success and this includes the performance of the practice after the deal has completed.
To maximise the chance of this longer-term success, you need to choose a buyer who will keep their promises and make good on the undertakings they made to you in your discussions pre-deal.
Communication with the team is very important in the weeks following a sale. We advise more frequent team meeting but also one-on-ones with all team members. The buyer needs to find out quickly about any sources of unhappiness or where they are doing something wrong, so that they can fix it. It is also important that the team gets a clear picture of where the practice is going.
Selling your dental practice can be a daunting prospect but it is also the start of a new journey which can be exciting with you free of the administrative burden of running a business and able to focus on your clinical work with a financially-assured future.
Gensmile is a group of over 25, high-quality, predominately private dental practices. The founding ethos of Gensmile is to partner with dental practitioners who seek to be freed of the demands of running a business and instead want to be able to focus on delivering high quality dentistry to their patients. We aim to be the natural home for top quality private practices.
While we are small, we have a full team to support each of our practices from compliance to marketing.
We believe that every practice is unique and we aim to retain the culture and legacy of each one. Our patients don’t see any change after we take over but we work and invest to support and grow the practice in-line with its historical practice.
We are fully owned by Gensmile’s founders and management team. With no private equity owner, we can take a truly long-term approach, rather than being focused on a short-term exit.
Our aim is that each of our dental practices is a place where dental professionals want to build their careers and where patients receive a best-in-class experience with excellent clinical outcomes.
Contact us for a password for more about our practices.Contact us Find out more