- Administrative functions are taken care of by DSO
- You can focus on dentistry
- Typically newer technology
- Typically newer practice space
- Gain a new peer network
- Continuing education
Sell Your Dental Practice to a DSO
As private equity continues to pour into dental, now is a great time to sell your practice to a dental support organization (DSO) supported professional corporation. It is estimated that DSO affiliated practices now control up to 20% of the dental practice market. With so much money pouring in, a dentist wanting to sell or affiliate has more opportunities than ever.
When selling to a DSO supported P.C., it is important to partner with a company like Dental Allies, who has strong relationships with many mid-size and elite DSOs. We serve as an intermediary, bringing together buyers and sellers, and can be retained by either party.
Dental Allies appreciates that there must be a philosophical fit between the seller and buyer and we work to merge the motivations, desires and operating philosophies of the parties. It is important that there is a good fit because you will most likely work together even after the transaction closes. We will work to solve problems, identify barriers, objections and arising issues.
We understand the differences between selling to another doctor, a group or a DSO supported P.C. For instance, most practices run EBITDA using the owner and operator model rather than the investor model. These two models will produce an imbalance. For many owner and operator’s, re-determining EBITDA using the investor model will typically create a much lower valuation.
When it comes to selling to a DSO supported P.C. there is no such thing as a standard transaction. The purchasing P.C. may or may not assume your liabilities, may pay cash or pay out over a given term, or change what information will be utilized to calculate your future payroll or commissions. If you stay on after the transition, you may no longer have any ownership. You will likely be an employee or even a 1099 contractor.
On the sell side, there are potential landmines that we stay on alert for. It is important that terms are clearly spelled out. An excellent example of this is production, which is doubly important if the final purchase price has a future production hurdle. While you may consider gross revenue as your production for the month, a DSO may deduct adjustments, refunds, reworks, collections and other variables.
Why would this be important to you? Imagine that the purchase price is $1,000. You will receive $500 at closing and earn another $500 by generating revenues of $100 per month for the next three years. You eagerly agree to this as per your own revenue equals production model, you have been earning at least $100 a month for the last two years. The DSO, however, has a different production calculation and your $100 a month in gross revenue is only $80 based on the DSOs calculation. In this scenario, you would lose 50% of your sale price.
If you go to work for the P.C., we will also make sure that your employment agreement is comprehensive and includes items such as whether you will be paid based on production or collections, whether revenues will be used in the calculations, whether the calculation is based on gross or net revenue and how adjustments, refunds, reworks and collections factor into your pay.
We could fill reams of paper with information about selling to a DSO supported PC. Rather than endlessly reading about it, give us a call at 1-800-881-6674 or send us an email to ask questions and learn what we will do for you.