Sales Opportunities Abound
There may never have been a more advantageous time to sell a dental practice than now. Private equity has opened up the coffers, and the amounts that DSOs are offering dentists to acquire their practices is unprecedented. With valuations soaring, many new DSOs have appeared on the scene to capitalize on the opportunities by offering a variety of new models, and this means more opportunities for dentists. In our January cover story, Inside Dentistry examines the rise in dental practice values, explores some of the structures and goals of the new DSO models, such as "invisible" DSOs, and discusses what DSOs are looking for when they appraise practices.
DSOs are changing the game. They had already altered it, but the landscape has changed so much more in the last year or two. With the extraordinary amount of capital chasing dental consolidation, it's important for interested practice owners to be careful of practice brokers who may be overpromising. Have they done a lot of deals? Are they being realistic? Beyond making adjustments to maximize the practice's value, practice owners also need to ensure that a DSO's expectations in the sale agreement align with what they are willing and able to deliver. Think about what your income will be after you sell and pay capital gains. Will you stay on and continue to work after the sale? What numbers are you expected to hit? What happens if you fail to achieve those numbers or decide to walk away earlier than agreed? You have to be able to hold up your end of the deal in order to fully realize the profit that is withheld at the time of sale.
For a successful transition, you really need to do your homework regarding the specifics. Some dentists don't think it all through and end up becoming miserable meeting the expectations or losing money. To protect yourself, I advise retaining an excellent lawyer and working with a practice broker to help with the contract. There's a lot of room for negotiation, especially with so many new players involved, so get creative and negotiate the best contract for you. If you really do it right, you can not only maximize all of the potential profit from your sale agreement, but also invest in the corporation and profit again later from the sale of the DSO itself.
Robert C. Margeas, DDS
Editor-in-Chief, Inside Dentistry
Private Practice, Des Moines, Iowa
Department of Operative Dentistry
University of Iowa, Iowa City, Iowa