CATEGORY 114 AUSTRALASIAN DENTIST There is no doubt that dental acquisitions can accelerate growth in comparison to organic evolution. A well-orchestrated acquisition can add new patients, additional treatment services, generate procurement efficiencies and make access to enhanced technologies far easier. Having acquired many general and specialist practices over many years there arenumerous key elements toevaluate from a purchaser’s perspective and it is critical to conduct in-depth due diligence to ensure that risks are appropriately managed. A good discipline to adopt is to ensure that you develop a comprehensive checklist of items that you should initially evaluate to determine whether an acquisition will fit financially, culturally and sustainably within your portfolio of assets. Naturally, the financial analysis of a practice should be “front and centre” of any potential acquisition. The accounts need to be normalised. That is to say that all non-related practice revenue and expenses need to be removed and adjusted to assess a true level of EBITDA. EBITDA is predominantly the metric that is used to underpin a practice valuation. The financial statements should ideally demonstrate continual growth or a high level of sustainability over a number of years. Up and down performance may suggest that there are internal issues inhibiting growth. How is revenue derived? Does it come from a single or multiple sources? Is there a high concentration of revenue generation amongst a single practitioner? If so, a heightened level of risk may be apparent if an adverse event occurs. How will you mitigate that risk? Without getting into an intense level of specifics some of the essential items that should be scrutinized would include a review of the demographic characteristics of the local area within which the practice resides. If there is an overly skewed aged demographic you will need to be aware that your patient database may need to be “re-fuelled” in years to come. Equally important here is to assess the level of competition that surrounds the practice and what service profile may be on offer. This assists to assess what your potential point of difference maybe. Are there interreferral opportunities amongst your other sites (if you are a multi-site owner). In considering other central fundamentals, the structure of an acquisition (ie: share sale or asset and goodwill sale) will potentially trigger tax and duty related consequences for the various parties. An early analysis of the upside anddownsidepositionswill alleviate downstream surprises. The structure of the agreed price will also determine what amount may be paid upfront and how much can be held back on retention as a security to ensure that the performance of the practice does not wane post settlement. The security of staff and contractors to the practice is an element that should be highly scrutinized. Without either, patients BUY – GROW – EXIT – for dentists Have you ever wondered why some dental practices flourish, provide excellent yearly profits and end up being worth millions, whist others flounder and get sold for very little at the end of the owner’s career? As you can imagine, there is quite a lot to this topic, but like many things in life, the strategies required to create a highly valuable business, compared to a lacklustre one, are more pragmatic than you may think. Renowned commercial lawyer and best-selling author, Joanna Oakey, has advised hundreds of dental practice owners over the past 20 years and has personally tracked the successes, failures, and common mistakes made by Australian dental practices, large and small. In her recent book, Buy – Grow – Exit, Joanna shares many of the strategies required to acquire a dental practice effectively, how to grow and structure the practice for success, and how to exit the practice with the best possible outcome for the practice owner and other stakeholders. Joanna, along with a panel of leading dental experts, including Dr David Penn, Carl Burroughs, Dr David Houston, Brett Buckley and Dr Peter Hughes, held a successful webinar series in early May to share and discuss some of the strategies needed to maximise your return from what is often decades of commitment, building and running your own dental practice. In this edition of the magazine we share three articles that touch on the topics of Buy- Grow – Exit. This series of articles is inspired by the book Buy, Grow, Exit, by lawyer and host of the leading business podcast: The Deal Room – Joanna Oakey. BUY – GROW – EXIT By Dr Peter Hughes Dr Peter Hughes COLUMNISTS
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