To our knowledge, we are the only healthcare/dental firm started by someone who actually ran dental practices…go figure! Unfortunately, this is all too common in the business law space as a whole. What lacks in lawyering today is the practical understanding of what clients face when they are making a life-altering decision, such as leaving a stable job to become a practice owner or selling something they have been building through sweat equity for years. While any decent lawyer will be able to point out “representations and warranties” that could lead to legal pitfalls post-transaction, very few are able to say, “I’ve been there and I understand.”
When we sold our 45-unit DSO in a 2018 private equity transaction, the legal bills were outrageous. What’s more, the lawyers of this nationally-renowned firm guiding us had zero practical experience. Not a single one previously ran a business, no less a dental practice. They had impressive credentials with degrees from the top law schools in the country, yet they lacked the ability to understand the emotional roller coaster that comes with such an exit. Further, once the deal was done, we never heard a word from them again…that is, unless a question arose on our part, in which case we were back on the clock from a billing standpoint. What lies below are some of the questions and considerations to help you avoid following ill-intended guidance and to make sure that a transaction is the right one for you.
Is This the Right Time?
I continue to be amazed that dentists and other healthcare providers turn to the biggest names they can find to negotiate a transaction. Let us first give credit where credit is due. These firms generally have a deep bench of fantastic attorneys whom will be on the line (with the billable hours mounting) to talk through issues during any purchase or sale transaction. What is lacking, however, is the discussion of whether such a deal is even right for the client. And why would a firm ask if the client is mentally and emotionally ready to buy or sell when that could jeopardize the whole transaction? Let’s be clear, we are not in the business of deal killing. If we have a combination of ready, willing and able buyers and sellers, we absolutely do not want to stand in the way of a successful transaction. But from time to time, we come across a provider who is clearly not comfortable with the fundamental idea of a purchase or sale and may feel that they don’t want to disappoint those around them by turning back. As a true advisor, it is our job to help clients consider both sides of the coin and realize no one should be pressured into anything.
Are You Prepared to Sell?
More often than not, a seller has not taken the proper amount of time to think through what giving up control of their business really means. Some of our gut-check questions include: What would a successful exit look like to you? How will you feel when you leave on a Friday as the boss and return Monday as an employee? Are you living beyond your means? Have you put a proper financial plan in place for when the day comes that you put down the drill?
Conversely, we remind our providers that valuations are sky-high and this may be the absolute best time to exit for them. As any provider who has sold – be it to a DSO/MSO or individual buyer – can attest, the factors to consider go beyond the initial payday. That said, if you want to maximize the financial return, you best be paying attention to what is happening in the market around us. There are major life implications that have to be considered and price is just one of them. Having a financial plan in place will prove critical to making an informed decision.
Are You Ready to Buy?
As noted in a previous blog post, the entrepreneurial spirit within you may be crying out to make a move. We get it! As we noted in that article, it is imperative to first get your team of advisors in order. Beyond that, and as stated above, you too must consider market conditions. As noted, the healthcare industry has continued to see exponential M&A activity year over year, leaving a crowded buyer pool. This does not mean you should merely throw your hands up and feel you can’t compete with Wall Street, but you should get hyper focused on the specifics of your target practice. Do you want to be close to home? Do you prefer a rural or urban setting? What is the ideal payor mix? Is there an opportunity to grow the patient base? Can the physical premises accommodate such growth? The list goes on, but as you can see, there is a drastic difference in the approach of true advisorsconcerned with your long-term success versus run-of-the-mill professionals whose primary focus is inching you closer to closing a deal.
What – and Who - is Best for You?
As every lawyer says at least once a day to a client…it depends. Depending upon what side of the table you sit, the above considerations must be talked through with your closest confidants, and yes, your attorney should be just that. Since making the switch from DSO founder/operator to attorney, my goal has been very clear: to tear down the antiquated way in which law is practiced as applied to our industry. Closing a complex deal is fun! There is no denying that. But putting a provider with whom we have a vested relationship in a crappy position is the stuff that keeps us up at night.
Further, as mental health advocates, it is our passion to be a resource to a group of healthcare professionals with one of the highest rates of suicide. We offer our guidance as a helping hand to doctors who may be trying to figure out the next step in their professional life and are frankly scared of the unpredictability of the future. Let’s be honest, it’s not just you taking the leap. You likely have family depending on you (financially and emotionally) or mentors, colleagues and friends who want to see you shine. A major law firm may have a rare individual who actually gives a damn about what is best for you, as their client. However, our boutique group is focused solely on putting you in the best position for success. Allow us to be a true ally, advocate and friend as you embark upon this journey. Call us at (860) 552-7770 or email info@martilawgroup.com.