What to consider when selling your dental practice: A guide to M&A by mydentist

Selling a dental practice is a milestone that many principal dentists look forward to and spend a huge amount of time planning for throughout their career.

However, when it comes to selling the practice and considering buyers, it can be a time-consuming process without the proper support.

To help those thinking of selling their practice, three industry-leading experts from mydentist have pulled together their top pieces of guidance to ensure the process runs as smoothly as possible.

Prioritise your exit strategy and consider timings

Your exit strategy should underpin the entire process.

Roisin O’Brien, senior M&A manager, explains: “There is an array of elements that any practice owner should consider, but the most important, I feel, is to have a carefully-thought-out exit strategy that includes timings.

“Timing is very important when selling your practice.

I’d recommend any owner looking to sell their practice starts thinking about what this could look like well before they actually want to exit, and that they have a clear strategy on what their aims are post sale 

“For example, they need to consider the demographics of their practice. Is the revenue heavily based upon their work? If so, they may have to realise a tie in.

“If that’s not something they want post acquisition, they need to start taking the steps, before considering selling, to rectify that which in turn takes time.”

Jon Day, head of M&A, adds: “I’d recommend any owner looking to sell their practice starts thinking about what this could look like well before they actually want to exit, and that they have a clear strategy on what their aims are post sale.

“There are many elements you need to ensure you’ve got in place to maximise the full value of your practice and these will need to be proven out over a couple of years of accounts in order for a vendor to take them into full consideration and be reflected in the valuation.

“For many, it’s about more than just the money, be clear on what’s important to you from a buyer – this is typically inclusive of patient care, legacy, and team.

If you are selling with a view to relinquishing the burden of running your practice, then a corporate buyer could be the best option as all of the management and running of the practice is taken over by the buyer  

“The process can also take up to a year from initially engaging with an agent or potential buyer and with changing external influences like market fluctuations, EBITDA multiples, contract reform, and corporate buying cycles, you will need to be ready to come to market at the time that best suits your business, not at the last minute when you need to get out.”

Ensure you find buyers who will help you to realise your own goals

When looking for the best-possible buyer for a practice, owners may face high demand or keen interest from a number of parties, making it difficult to know who the right people to sell to are.

The best way to work around this may be to bring things back to basics.

Shaun Wilde, director of business development, advises: “What is the reason for selling your practice?

“This reason should determine who the right buyer is for your practice.

“For some vendors, selling to an independent buyer will work for them as the best option (if you’re planning to retire, for example) and therefore selling to a buyer who intends to take your patient list and work in the practice could work out to be the most-viable route.

“However, if you are selling with a view to relinquishing the burden of running your practice, then a corporate buyer could be the best option as all of the management and running of the practice is taken over by the buyer.”

It’s important to ensure that you’re clear on your buyers’ future plans, too.

Day said: “It’s vital that the vendor understands the buyers plans for the practice and how they wish to develop the business moving forwards.

The last thing a vendor needs is to sell their practice, but still be left with the day-to-day running of the practice and all the stress and distraction that this brings with it 

“The seller should be comfortable with these plans, taking into consideration the ongoing care being offered to their patient base, the careers of the team they have built up, and the legacy they wish to leave behind.

“If the vendor is looking to retire from practice ownership but still enjoys practicing clinical dentistry, wanting to work in practice post sale, then the support that the buyer has available to put in place will be key to the successful operation of the practice moving forwards and creating an environment where clinicians can flourish and continue with their career development.

“The last thing a vendor needs is to sell their practice, but still be left with the day-to-day running of the practice and all the stress and distraction that this brings with it.

“If the vendor is looking to retire completely, then the deal structure is key.

“There is likely to be some form of deferred payment element to the deal, but with some buyers this can stretch out to as much as five years.

“Clearly this won’t provide the buyer with the freedom to exit the business and enjoy the capital they’ve realised from the sale of the business until such time that the tie in period has expired.

“Some buyers will also attempt to target the vendor on the performance of the practice post sale.

“This is completely counter intuitive; the vendor has sold the practice to relinquish the responsibility of running the practice, but is still somehow expected to drive performance post sale.”

Challenging misconceptions and retaining clinical freedom

There are many reasons that practice owners choose to pursue a sale of their practice.

For some, it may be to remove the administrative burdens of owning a practice so they can return to delivering dentistry and furthering their own clinical development.

Wilde explains: “Historically, there has been a misconception that corporate buyers will take away or dampen clinical freedom, for example limiting the materials that dentists can use or the labs that work can be sent to.

“Luckily, this couldn’t be further from the reality of mydentist, with clinical freedom remaining at the core of everything we do.”

Day adds: “mydentist works very hard to support clinicians in delivering the best possible patient care and the size and scale of our network is one of the core ways we can achieve this.

“We promote clinical choice and have the largest clinical support network in the UK, so clinicians are always trusted to deliver the dentistry that they want to, but with an enormous support network in case they ever need it.

“I have also heard misconceptions that corporates will try and tie you into a deal and penalise you against targets if the practice underperforms.

One of the biggest misconceptions I’ve seen is that all corporates are the same and that they all offer a ‘one size fits all’ approach 

“While this may be true for some corporates, mydentist structures the deal with a two-year tie in in most cases and will not target the vendor on practice performance post completion.”

O’Brien offers a different perspective, adding: “One of the biggest misconceptions I’ve seen is that all corporates are the same and that they all offer a ‘one size fits all’ approach.

“When we acquire a practice, our approach is very much tailored to the needs and requirements of the owners.

“From the outset, we’re open and lead with transparency with our vendors – that’s something I’m very proud of,”

Here are their top tips for a smooth sale.

1. It’s important to ensure you have regular catch ups with prospective buyers in the early stages of the transaction, and that they are always available through an open line of communication throughout. If you have a trusted member of the team who you can include in the process without disrupting the daily operations of your practice, this will support a successful transaction and share some of the workload. Don’t think any problem is insurmountable – if you’re unsure, just ask. Everyone is working towards the same goal and therefore will pull together to get the practice sale over the line.
2. Consider the experience of potential buyers. When thinking about a sale of your practice, it’s vital to ensure your potential buyers are on the same page as you and share your vision for the end-goal – whether that’s to give you a smooth transition to retirement or remove the burden of running a practice so that you can focus on your own clinical development. It’s important that you opt for buyers who have experience in operating practices and supporting teams through the transition period, which can be tough if not handled correctly. It’s also important that they can tailor offers to suit a given situation and facilitate a smooth and efficient transition, offering guidance throughout.
3. Where possible, work with a legal team experienced in M&A. One key tip is to hire a legal team who have good experience in M&A and if this experience extends to dentistry or medical care, then even better. They will be better placed to guide you through the nuances of selling your dental practice, such as healthcare regulations, licensing rules, corporate practice of medicine restrictions, and various privacy laws.

To learn more visit https://www.mydentist.co.uk/acquisitions/