Practice Acquisition Program
Analyzing the amount of data required to successfully recommend a dental practice for acquisition should be completed by professionals with a strong dental business and additional clinical experience. Oftentimes construction will be needed and the number of operatories will be increased. Having the knowledge to provide the due diligence and the clinical expertise to make recommendations of a practice’s health to provide a positive ROI is essential.
There are three pillars of the Practice Acquisition Strategy:
- Strategic Exposition – Assembled data will be evaluated and interpreted to show the market attractiveness, competitive position, integration catalysts, transaction justification, and revenue creation potential. Uncovered findings may have a significant bearing on the decision to proceed with the transaction;
- Liability Outline – Comprehensive evaluation of the practice’s financial returns and KPI’s, along with the essential processes and fee analysis, etc. and will likely reduce or eliminate a liability concern. This information could be used in price negotiations and is usually outlined in this section.
- Post Analysis and Declaration – Once these findings are exposed with recommendations outlined, their impact on the proposed acquisition can be negotiated with the selling doctor and his legal team. Some of the most common negotiating tactics include:
- Price reduction: If the price of the acquisition depended on the findings of the “due diligence” this would allow for negotiations to begin. There must be documentation of the reason for the new negotiation as the original offer was noted in the original LOI (Letter of Intent). Any change in this offer should be referenced back to the documentation that provoked the initial change. Some examples of these changes would be a change in the insurance standings and an exodus of patients, or impaired fixed assets and the transaction was mainly an asset based transaction.
- Legal protection: Should be used in instances of uncertainty or for risk mitigation. Warranties and indemnities are all common outcomes of the due diligence process. Typically these will be included in any Share Purchase Agreement (SPA) with the selling doctor providing representations at the point of sale. Should the selling doctor refuse such provisions, the purchasing doctor may have to be prepared to walk away from the transaction.
- Closure: The due diligence report may (i) give the purchasing doctor the “all clear” (ii) identify misrepresentations made by the selling doctor’s management team or (iii) uncover other issues which could complicate the transaction or render it impossible. An example of this would be uncovering embezzlement where an active investigation needed to take place.
- Post – Deal Negotiations: There may be instances where there were no deliberate intentions to withhold information or report inaccuracies during the initial information gathering process but after the liability outline there are new documents alerting the buying and selling doctor. In this case, both parties agree to negotiate in the best interest of the transaction to include these new findings without having to walk away from the transaction.
In any of these negotiation outcomes, DSO Success Consulting is prepared to advise you of the potential risk or reward for the journey you are about to embark. Working together to scale your business by making the appropriate decisions along the way will ultimately lead you to a more fulfilling and balanced DSO owner.
This program supports the organization’s/practice’s executive team in determining viability of a practice purchase. Includes:
- Evaluation of KPI
- Evaluation of Essential Processes
- Evaluation of Team
- Evaluation of compatibility of Selling/Senior Doctor with Associate Doctor
- Insurance Plan Analysis
- Fee Schedule Analysis
- Projected Initial investment in technology/equipment/remodel
- Assistance with Research of Finance means