Growth through acquisition

March 21, 2012

Now that you have your team in place, your next step is to find the dental practice. There are practices for sale throughout the country but the pricing is now increasing due to a number of factors such as the economy and the fact that dental practices are very stable financially so that dentists are not selling as readily as in the past. Many dentists have lost considerable money in their retirement plans and also can not afford to retire for that reason as well since their savings have been depleted.

Now that you have your team in place, your next step is to find the dental practice. There are practices for sale throughout the country but the pricing is now increasing due to a number of factors such as the economy and the fact that dental practices are very stable financially so that dentists are not selling as readily as in the past. Many dentists have lost considerable money in their retirement plans and also can not afford to retire for that reason as well since their savings have been depleted.

Specialty lenders have money readily available for a sound acquisition so when the practice becomes available for the acquiring dentist, the flow of information begins. It is not uncommon to have a direct loan equal to the practice acquisition price plus an additional ten percent to fifteen percent for working capital. Finding the dental practice can be accomplished through dental practice brokers, your own marketing people searching for the practice and through professional journals as well as your own advisory network. Your advisors, if experienced and known throughout the dental industry, have contacts of their own and can assist in the search for your acquisition.

At this point, you will find that your team starts paying for itself. Once the practice is found, the analysis of the financials, the study of the clinical side of the practice, the patient retention and new patient monthly additions, among other items, will be studied. A practice valuation should be ordered even if you feel there may not be a need for one. The lenders like to see an appraisal, similar when buying a home, so that they receive a comfort level as to their loan to value with the acquisition and their willingness to lend a substantial amount for working capital, which is almost always needed at the acquired practice. Your “inside” people can do the majority of the analysis and when the point is reached where you are almost ready, your outside CPA should be involved to assist in presenting the tax ramifications and helping with the presentation for the financing. Once these areas of expertise have been addressed, your lawyer should be involved for the preparation of the acquisition contracts or for the review of contracts prepared by the selling dentist’s attorney. The allocation of the purchase price, the warranties and representations agreed upon by you and the seller and the loan package approval will all be in motion as the due diligence process is proceeding.

The Acquisition is in Place. Now What?

Congratulations on your acquisition. Typically the infrastructure of the acquired practice remains in place at the dental practice that has just been purchased. If there is a transition in personnel, a good time to do so is after you and your business personnel are soundly in place and thoroughly understand the nuances of the acquired practice. Some of your team will arrive and spend a good deal of time at the new practice converting systems or learning the systems that are in place and teaching the staff your methods for continuity and for streamlining your commonly owned practice into a format that is similar to your own. This exercise will ensure that what has just been purchased will pay for itself and also bring profits and the ability for continued growth through acquisition to you and to your team.

About the author

Bruce Bryen is a partner in The Snyder Group and managing partner for Bryen & Bryen LLP, Certified Public Accountants. Based in New Jersey, Mr. Bryen specializes in deferred compensation such as retirement plans, income and estate tax planning, the determination of the proper organizational format, asset protection and structuring loan packages for presentation to financial institutions. Bruce is also experienced in providing litigation support services and has testified on numerous occasions as an expert witness. Contact him at 800-988-5674, ext. 112.