There have never been more resources available to doctors looking to sell their practice. With the rise of the DSO and the speed of consolidation picking up, many people have decided to enter the world of dental deal-making. This has made for a murky environment for doctors looking to find proper representation when exploring options to sell.
With any maturing market, it is common to see new entrants. We are regularly seeing new DSOs and professional and support service companies enter the space. Working in a rapidly changing and maturing environment can be challenging, and it’s important to be diligent when selecting who you work with. Choosing the wrong accountant, the wrong practice management software, or the wrong supplier can be detrimental to you as the practice owner. When planning the next phase of your practice, whether that’s selling to a private dentist or a partnership with a DSO, it is important to understand the resources available to you.
A brief history
Up until the mid-2000s, dentists had one option when selling: to sell to another dentist. Selling dentists would rely on a regional practice broker who had knowledge of all doctors in the market. There are still many experienced dental brokers out there, and they are the best suited for doctor-to-doctor transactions because they understand the landscape of the region and create great connections.
With the rise of DSOs, many traditional brokers have had to sell practices to a new type of buyer. Selling in a doctor-to-doctor deal is very different than selling to a private equity (PE)-backed DSO with teams of financial analysts and attorneys to evaluate deals, provide offers, and create complex structures.
Asking the right questions
The skills and qualifications required to properly represent a doctor interested in partnering with a DSO are not easily obtained. It is important to consider the following when choosing an advisor:
- What is your experience with selling practices to DSOs? (How many deals have you closed? How many buyers have you worked with?)
- Do you have an in-house analytics team or do you outsource? (Out-sourcing analytics is not in a seller’s best interest.)
- How familiar are you with PE firms backing DSOs in the space?
- Are you compensated by DSOs for bringing your clients to them?
- How many past clients who sold to DSOs can you introduce me to?
State of the (M&A advisor) union
New entrants have been flowing into the space and therefore it is imperative that doctors looking to transition are diligent. We have seen several bad actors in the space that are attempting to “roll up” a group of dentists to maximize the valuation or the “multiple” that they would receive in the sale to a DSO. These individuals have zero experience in buying or selling businesses in the PE environment, and they have left a wake of unfulfilled promises to doctors. Additionally, there are consultants in the space who are simply trying to monetize their rolodex of clients. Often, they’ll ask you to sign up for a specific program or sign a contract with several promises around purchasing your practice or partnering with their “DSO.” They promise equity in their organization, and often it is never realized. Hiring an advisor who exclusively focuses on representing dental practice owners is your safest, most rewarding option.
There is only one way to maximize the value of your business, and that is to work with a professional to fully explore the market. The number of buyers has never been greater, and the range of quality has never been broader. It is easy to get caught up in the feverish pace of consolidation, but a formal process requires time and an experienced advisor. Hiring the correct representation means more today than ever. Ask the right questions, be diligent, and make the best decision for the business you’ve spent your life building.
Editor's note: This article appeared in the May 2024 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.
Ryan Mingus, managing director of Tusk Practice Sales, has 12-plus years of sales and leadership experience in the dental and health-care industry, most recently as business development director for strategy and optimization at Align Technology. Mingus earned his BA in economics and business from the Virginia Military Institute and his MBA from the University of San Diego. He also held the rank of Captain in the US Army National Guard.
