All of those years. All of that effort. How many sleepless nights? Personal guarantor on each and every loan with the bank. Recruiting all of those associates and leading your team to a point of stability. Your business has finally arrived at an admirable level of success – not to mention profitability. 
And then the phone rings.
On the other end of the line is a guy you’ve never met who seemingly knows everything about your business…and he wants to buy it! What an incredible justification for all of your hard work!
So, what are you going to do?
If you’re involved in the world of group dentistry, you know that we live in some fascinating times. And if you own a group practice or DSO, either you or someone you know has probably received just such a phone call. It’s called an unsolicited offer (to buy your business).
Here are 5 things to know about unsolicited offers:
- The people making the calls are smart, well-connected and incredibly informed. They do their research and they’re proactive. You got the call because you’re on their radar, and the reason you’re on their radar is because you run a great business. It’s OK to feel flattered. You’ve earned the right.
- They want to buy your business before it “hits the market” and is open to other potential suitors. The simple reason for that is because if there are no other buyers, then they’re controlling the selling price as well as most of the key terms of the deal. You have no other party for them to negotiate against. That doesn’t mean they’re trying to take advantage of you; it just means that they’re not under any real pressure to make concessions. Your negotiating position is really only as strong as your desire to walk away, which is a tough spot to be in.
- No other potential buyers means they can usually make the purchase at a number more reasonable to them and their investors. If you’re unaware of comparable market sale prices, then it’s tough to tell if you’re getting close to fair market value for your business.
- The stated selling price and EBITDA multiple are the eye-catching, sexy numbers everyone likes to throw around at the 19th hole, but the true best offer is found in the details of the deal. You may want 100% of the selling price to be cash-at-close. But they may want it to be closer to 0%. Now, let the real fun begin! Deal structure (% Cash-at-Close, % Escrow, % Earn Out, % Equity Roll, % Preferred Debt, etc.) can be as important to the seller as the purchase price.
- If no other potential purchasers are in the mix, the likelihood of the purchaser increasing the offer is low. Additionally, realize that it is very doubtful that their due diligence process will ever uncover points that will be in your favor, so it’s safe to count on the EBITDA multiple to hold up, but the selling price to decline.
If you’re really interested in selling your business, then the person making the call could, in fact, turn out to be the best purchaser and best partner for the future. By all means, take the call! And listen to what they have to say.
In the end, be sure to ask them 5 questions:
- How did you get my name and how did you find out so much information about my group practice?
- What attracted you to my business and why do you want to buy it?
- Can I get your offer in writing?
- Can you provide me a link to your company website?
- Can I get a list of referrals of other doctors who have sold their businesses to you in the past?
After doing a lot of soul-searching, fact-finding and research on your own end, you may decide that now is the right time to sell your business. One point of caution that I would share is that selling a group or DSO is an altogether different process and event than selling a solo dental practice.
If you think you might be ready, you’re going to need to consider things like:
- Tax consequences of your corporation as well as stock versus asset sales.
- How EBITDA add-backs and a Quality of Earnings report can impact valuation.
- Deal structure and employment agreements.
- The time required to manage the M&A process.
- A realistic timeline of events in the overall process.
If you have received an Unsolicited Offer or you’re interested in learning more about this topic, feel free to reach out to us directly to learn more.
Also, stay tuned as we’ll be covering this topics in much more depth in the coming weeks. And if you think you might be nearing the point of wanting to actually take your business to market, then please consider joining us in Houston March 21st- 23rd for our seminar: “Selling Your Group Dental Practice or DSO: what you need to know and what you should expect.”
As always, if you’d like to discuss these topics or any others related to trends in our industry, please feel free to contact me at perrin@tusk-partners.com. TUSK is the leading dental middle market M&A advisory firm providing best-in-class services and flawless execution for clients worldwide. Advising Industry Leaders on growth opportunities, capital sourcing and exit strategies are what we do best. We combine historical experience with a progressive vision for our evolving industry in order to create the greatest value for our clients.
