Navigating the Maze of Corporate Veterinary Buyers
Navigating through the maze of corporate consolidator buyers can be a daunting task. There are a large number of consolidators and they are purchasing a large number of veterinary practices. Current estimates are that about 17% of the U.S. practices are owned by consolidators.
Practice owners reach out to Total Practice Solutions Group (TPSG) every day for advice on selling to corporate consolidator buyers and mention receiving multiple letters and phone calls every month from corporate buyers. Many owners experience confusion when trying to sort them all out. Owners tell us that they come away thinking that all the corporations sound like very good purchase candidates and the sellers believe their practice would be a good fit with each of the corporations. Does that mean that all the corporate consolidators are equal or the same? The simple answer to this question is: “No, they are not all the same.”
Each corporate consolidator has its own mission statement and financial goals they wish to achieve. In addition to the more established and well-known corporate consolidators, many new consolidators are getting into veterinary medicine since veterinary medicine is such a “hot market” right now. The newcomers’ experience in practice management may be minimal which can put a larger burden on the seller to continue to manage the day-to-day activities.
Since we negotiate a lot of corporate sales, the number one question we receive is: “How much can I get for my practice?”. As with many things in life, the answer is usually “It depends.” One part of the answer we are confident in is that a seller is likely to get a significantly better deal with the help of a broker than if they negotiate on their own. TPSG understands each of the corporate players and how they negotiate which allows TPSG brokers to negotiate the best price and terms for our seller clients.
All corporate consolidators prefer not to pay any more than they have to for a practice. They may have different end games and goals, but they are skilled negotiators in working toward those goals. Some consolidators have proven track records and are purchasing practices in the veterinary industry for the long haul. Some are in it for the short term to eventually “flip” the practice to a larger corporate for profit and then exit the market. Others will sell to a private equity group which they term “recapitalize”. This approach can be beneficial to the original seller if they received stock as part of the original purchase price as the seller will realize gains. Of course, it is important to know what type of shares of stock you receive as there are different risks associated with A, B, or C class shares and the recapitalization multiples need to be realistic and not over zealously inflated to make the total offer price look better than it really is in case that recapitalization multiple is not achieved.
The maze of selling to a corporate consolidator gets even more complicated when the purchase price is tied to the future financial performance of the practice, how long you stay working, and/or your employment contract. Most all corporate buyers want to keep the practice doctors, paraprofessional, and lay staff at the current rate of pay and benefits. In fact, sometimes the benefits offered to employees are even better than the employees currently receive.
The overall goals of the sale are to maximize the sales price and terms for the seller, be a good fit for the practice and employees, and maintain the clients’ satisfaction. All of these goals are achievable if the sale is negotiated and structured correctly with an experienced advisor. Having an experienced guide at your side, assisting you in navigating the maze of selling to corporate, is sure to provide you with a streamlined process resulting in a lucrative transition.