How to Deal with Corporate Buyers
If you have a medium to large sized practice you have no doubt been contacted by one of the dental corporate buyers offering to acquire your practice. By way of background there are three primary corporate buyers (the “Corps”): Dental Corporation of Canada (DCC), Altima Dental and Vibrant Dental Group or 123 Dentist. Dental Corporation of Canada was founded in 2011 and is the largest of the three with approximately 250 locations. Altima Dental was founded in 1993 and has approximately 50 locations. The newest, Vibrant Dental Group or 123 Dentist, is the combination of parts of the 123 Dentist group of practices from British Columbia and Vibrant Equity, a Toronto based boutique investment banker. 123 Dentist and Vibrant launched their national platform in the summer of 2017. While there are a few other smaller corporate buyers, the three mentioned above are the largest. It should also be noted that the Corps are different than the typical Private Investor Dentists who tend to own a half dozen to a couple of dozen practices and are not looking to expand much beyond that. Most Private Investor Dentists are dentists who just enjoy the management aspects of dentistry.
Given their stated practice acquisition goals, on a combined basis, the Corps are still looking to acquire at least 300 to 400 more practices. DCC and Altima are not only on the hunt for more practices, but they also have the financial resources with bank account balances that start with “B” as opposed to “M”, to follow through with their objectives. The question then is, as a seller, how do you deal with these giants? The answer is carefully!
To start with, the Corps will all spend a little more than the average individual dentist or investor dentist. They will also do their own “appraisals” and do not charge the vendor a commission. Many dentists see this as a significant cost savings, particularly when compared to the ancient 10% commission that some brokers used to charge. In the past, many dentists saw this “cost savings” as the only justification needed to sell to one of the Corps. There are of course lots of reasons why many dentists would prefer not to sell to any of the Corps, but that is not the issue at hand. The issue at hand is how to handle the process if you have already decided to sell to a Corp.
What then do you do when one of the Corps comes knocking at your door? The inclination, and certainly the choice of the Corp, is for you to sell with minimal questions asked and why not – they are likely going to pay more than you thought anyone ever would, and they are not going to charge you an appraisal fee or a commission. They are also going to aggressively try to get you to sell quickly. Sounds good, but wait, not so fast. Not too long ago there was one Corp that was super aggressively trying to buy everything of any reasonable size that it could get its hands on. Today however, there are at least three Corps trying to buy anything of any reasonable size that they can get their hands on. Eureka, you have leverage!
As we have already mentioned, selling to a Corp is not something that everyone wants to do. There are lots of stories around from dentists who have had unhappy corporate experiences, however, if you add leverage to the equation you dramatically expand your options. All of the dental Corps are under pressure to expand – they have investors who are looking for a return, investors that do not want their capital sitting in a bank collecting interest. You now have strong corporate competition for your practice. In order to get what you want from a corporate experience, you need to know what you want, and you need to have a plan to get what you want.
Your next steps should be as follows:
- Decide what your ideal scenario would be. Do you want to sell and stay or sell and go? Do you want to continue to manage or not? Decide what your perfect scenario would be.
- Call an advisor who can put your perfect scenario into a proposal for presentation to the buyers – that is plural. You need to pick an advisor that can think outside the box, but also one that has experience with the Corps. Not only will the presentation proposal contain your objectives, but it will also contain favorable terms that you likely never even thought of – ideally that advisor would be me.
- Your advisor, using your perfect scenario, will put a proposal together and present it to all of the corporate buyers and, ideally, negotiate a deal that approximates your perfect scenario. This works because all of the Corps want/need to be buying dental practices. They will know that one of them will get your practice, so they have a double jeopardy situation – if they don’t buy not only do they lose an acquisition, but one of their competitors gains an acquisition.
The key here is that with the right help you can drive the Corps into a bidding competition related to both price and, very importantly, terms.
If you are currently being approached by one of the Corps, it is important that you speak with someone before signing any paperwork. We welcome all calls on a confidential and complementary basis, so please do not hesitate to pick up the phone and dial 866-853-5344.