Seller Articles

• Corporates are continuing to expand.  Not only in the U.S. and Canada, but this corporate buyer has begun acquiring practices in Australia and New Zealand.
• Some corporates have begun to do de novo practices.  They are filling the gaps where they don’t have ownership of a practice with a startup practice.  If you can’t buy it, build it!
• The DVM retention rate for the industry is 62%.  A particular corporate claimed to retain DVMs at a rate of 82.5%.  They said it’s due to how they treat the DVM and staff leaving everything as close to the same as possible. They also give the owners a piece of the pie.
• There currently is a shortage of DVM associates. They are putting a heavy effort towards recruiting DVMs at Veterinary Schools as well as the general public.
• This corporate has three commitments – Wellness Plans, Dentistry, and Fear-Free Clinics.
• They expect the current acquisition trend to continue for the next three to five years.
• Valuations are different among the various corporate buyers.  Their add-back for DVM salaries is 20%.  Another corporate buyer uses 22%.  That can make a big difference in the purchase price on a large practice. Another example is adding back an office manager salary.  That can vary significantly amongst corporate buyers.  These are just two of ten examples of the differences they provided.
• Valuations have gone up over the past 5 years.  Five years ago, they were buying practices at 4x to 5x EBITDA.  They are now acquiring practices at a broader range of 6x to 9x EBITDA.
• They believe valuations are currently at their high peak with the expectation that they will start tapering back down to the 4x to 5x EBITDA range they saw five years ago.
• General Veterinary Practices that are in the sights of corporate acquisition teams represent 50% of all General Veterinary Practices.  Corporates currently own 30% of all of these practices.  The expectation is that once total corporate ownership hits 50%, the acquisitions will taper off dramatically.  Corporates then may turn to specialty clinics.  Note, we’re already seeing this in the marketplace.  They also may focus on de novo practices.

In summary, the presentation confirmed what our thoughts have been:

1. Corporates are here to stay.
2. Corporate ownership will continue to grow.
3. There are some good corporate buyers who treat their staff and DVMs well and there are others that do not.
4. Corporates will go the de novo route when they can’t find a practice in an area they want to have a concentration.
5. Valuations will begin to trend down in the not too distant future.

The number of corporate buyers in the market and the supply of practices corporates want all play into this.  Whether good or bad, the corporate veterinary practice is here for the long haul.

This is just meant as an educational document and we are not promoting this or any other corporate buyer. ​

• Corporates are continuing to expand.  Not only in the U.S. and Canada, but this corporate buyer has begun acquiring practices in Australia and New Zealand.
• Some corporates have begun to do de novo practices.  They are filling the gaps where they don’t have ownership of a practice with a startup practice.  If you can’t buy it, build it!
• The DVM retention rate for the industry is 62%.  A particular corporate claimed to retain DVMs at a rate of 82.5%.  They said it’s due to how they treat the DVM and staff leaving everything as close to the same as possible. They also give the owners a piece of the pie.
• There currently is a shortage of DVM associates. They are putting a heavy effort towards recruiting DVMs at Veterinary Schools as well as the general public.
• This corporate has three commitments – Wellness Plans, Dentistry, and Fear-Free Clinics.
• They expect the current acquisition trend to continue for the next three to five years.
• Valuations are different among the various corporate buyers.  Their add-back for DVM salaries is 20%.  Another corporate buyer uses 22%.  That can make a big difference in the purchase price on a large practice. Another example is adding back an office manager salary.  That can vary significantly amongst corporate buyers.  These are just two of ten examples of the differences they provided.
• Valuations have gone up over the past 5 years.  Five years ago, they were buying practices at 4x to 5x EBITDA.  They are now acquiring practices at a broader range of 6x to 9x EBITDA.
• They believe valuations are currently at their high peak with the expectation that they will start tapering back down to the 4x to 5x EBITDA range they saw five years ago.
• General Veterinary Practices that are in the sights of corporate acquisition teams represent 50% of all General Veterinary Practices.  Corporates currently own 30% of all of these practices.  The expectation is that once total corporate ownership hits 50%, the acquisitions will taper off dramatically.  Corporates then may turn to specialty clinics.  Note, we’re already seeing this in the marketplace.  They also may focus on de novo practices.

In summary, the presentation confirmed what our thoughts have been:

1. Corporates are here to stay.
2. Corporate ownership will continue to grow.
3. There are some good corporate buyers who treat their staff and DVMs well and there are others that do not.
4. Corporates will go the de novo route when they can’t find a practice in an area they want to have a concentration.
5. Valuations will begin to trend down in the not too distant future.

The number of corporate buyers in the market and the supply of practices corporates want all play into this.  Whether good or bad, the corporate veterinary practice is here for the long haul.

This is just meant as an educational document and we are not promoting this or any other corporate buyer. ​

Whether you are approaching retirement age or just thinking about a transition, there are several things you can do to prepare your practice for sale.  Doing these things may help eliminate headaches, increase your sales price, or reduce your costs.  Here are a few tips:

1.  Assess your equipment.  Upgraded practices sell faster.  If you are more than five years away from retirement, I recommend a few upgrades such as digital x-rays, recover your chairs if needed and freshen up the paint.  If you’re closer than five years, you will not get the tax benefit of major upgrades. Just stick to updating the paint and carpet.
2. Clean up your accounts receivable.  Reimburse patient credits, collect old accounts and keep the A/R current.
3. If you have an associate, make sure you have an Associate Agreement with a non-compete.
4. If you have an employment agreement with your corporation and you are a C-Corporation, you may need to terminate yourself a few years before retiring.  Consult your tax accountant.
5. Consult your financial advisor and tax accountant.  How much do you need to retire?  How much do you have?  What are the tax consequences?
6. Get a practice valuation to see what proceeds you will get from the sale.
7. Be realistic in the time it takes to sell.  In remote areas, it can take a year or two.  Metro areas, much less.
8. Keep your production up as you near retirement.  I see dentists slow down all the time in their last few years.  Work the same number of days.
9. Assess your staff.  Do you have too many staff?  Do you have one that should have been let go seven years ago?
10. Have a practice assessment performed by a qualified consultant.  Many will do it for free or a small fee.  This may help show you some areas to improve over the next few years.

By focusing on these items in the coming years as you near retirement, you will avoid having your practice production and thus the price of your practice go down in your later years. Call me for a free consultation. I would be happy to take a look at your practice and give you my thoughts.  Or, if you are thinking about transition right now, we have a database of buyers looking in your area.
​877-866-6053

I have heard from other practice transition consultants, bankers and attorneys who are telling me they are busier than ever.  We, Omni Veterinary Practice group, are experiencing the same thing with more listings and more practices under contract than ever before.  So, why are so many veterinarians deciding now is the time to sell?  I believe it’s for a number of reasons:

1. Interest Rates are rising.  Buyers have had the luxury of living through ultra-low interest rates over the past five years.  Historically, interest rates on practice acquisitions have been around 7% to 8%.  The last five years, we’ve seen them dip down to an average of 3.8% and one bank offering loans at 1.89%!  Crazy rates!  Buyers are now seeing the rates creep back up.  Current rates are around 5% to 5.5%.  This is scaring some buyers into acting on their desire to own a practice.  They feel if they wait, interest rates will be back to the 7 to 8% rate soon.
2. Baby Boomers are reaching their peak.  Baby boomers doctors make up the largest portion of the veterinarian population.  Approximately 50% of veterinarians are now over the age of 55.  The largest portion of the baby boomer population is now hitting their mid-60’s.  These doctors are now selling and retiring.  Along with this, as we age life events, such as health issues, or even death happens.  We are seeing sellers with health challenges where they cannot work at the same pace as they were before, or they cannot work at all.
3. Veterinarians tired of being Practice Owners.  Several of our current listings are from doctors in their 40’s or 50’s who are just tired of being owners.  Managing staff and managing expenses such as rent, employee benefits, etc., have caused owners to rethink their dream of owning a practice.
4. Equity Harvesting.  Veterinarians at the peak of their production in their practice are deciding to sell their practices and get the equity out before production goes down.  Many are selling to either small groups or investor veterinarians who allow the seller to not only harvest their equity but also to work back in the practice.  A perfect storm in most situations.

Whether you fit into any of these categories or even if you are in the middle of your career, you owe it to yourself and your family to have a transition plan in place.  Life events happen.  We meet with veterinarians of all ages to discuss their career plan and look at different options of how to sail into retirement, or even sell and work back. We put customized plans in place and offer solutions in the event the doctor needs to sell quickly.

So, where are we now?  In an article I wrote for the Washington State Academy of General Dentists called The Perfect Transition Storm, I explain that we’re experiencing an anomaly in the practice transition market.  I have been working with dentists since 2004 helping them transition into or out of a practice.  There have been times when interest rates are good, but there are not many buyers.  There have been times when the economy was doing well, but not many sellers selling their practices.  But, in the past almost 15 years, I have never seen a time when everything aligned so well. Here’s how this adds up:

1.  The transition market is still a sellers’ market.  There are not many “good” practices on the market.  Good practices are producing over $600,000 per year with 65% or less overhead and at least 10 to 20 new patients per month.
2. Banks love dentists.  The default rate is below .0125% for dental practices.  More and more, banks have been seeking to lend to dentists to buy practices.  Recent offers from some banks include 1.78% interest rate for the first two years adjusting to 4.9% for 10 years after that.  The average rate currently is 5.125% on a 10-year term loan.
3. The economy is strong.  Many dentists I talk to tell me that they are busy.  Patients are employed and either has the funds or have insurance to get theirs and their family’s dentistry done.
4. Competition for the good practices is up.  We are starting to see corporate practices such as Heartland come into the Northwest and other markets seeking out practices grossing over $800,000 in collections.  Small group practices are also out there looking for good practices.  We also have solo buyers looking to acquire their first practice.
5. Practices values are up due to demand for good practices.  A typical practice may sell for 70% to 75% of collections in an average market.  We’re now selling practices for 5% to 10% higher, mainly due to demand.

Mesh this all together and you get a formula for a good transition market.  There’s high demand for good practices.  Interest rates are low.  Practice values are above normal ranges.  If you are thinking about selling within the next 3 to 5 years, it would be prudent to sit down with your financial advisor, broker, or other advisor to take a look at your situation.  Timing can be everything and good markets don’t last forever.  We would be happy to buy you a cup of coffee and discuss your situation and help put a plan in place to make sure you are in the best position for when it’s time to transition. Contact us today! 877-866-6053.