Sponsored Content: TUSK Partners
By Kevin Cumbus, President of TUSK Partners
If you have a practice with over $1 million of collections, or more than one location, it’s a safe bet that you’ve been contacted by a buyer, and possibly received an unsolicited offer from them.
Buyers in our market love to connect with dentists and groups directly to help inform them of their EBITDA and value. Why wouldn’t they? They get to control the story, the financials, and the process. The less you know, the better for them.
My only hope is that you didn’t take that offer. Taking an offer from a buyer without running a competitive process is doing you and your estate a disservice. If you took that offer, you left money on the table and, worse, might have missed the opportunity to do a deal with a partner that would be a much better fit for the long run.
Working through an unsolicited offer from a Private Equity-backed DSO is the equivalent of bringing a knife to a gunfight. That nice business development person you are talking with (the one who is getting to know you and your spouse over plates of sizzling steaks and bottles of red wine while promising you rich returns on your equity) is not the only person on the team working to buy your business. Behind them, there is a team of analysts, high-priced attorneys, brilliant CPAs, and Private Equity guys who are all wading through your numbers, helping the CEO pull together an offer that they hope you will accept. In deals where you are unrepresented, you are outgunned, outmanned, and will likely be outdone.
They start by asking for financial and operational information, and you think, what can it hurt to share? This opens the door, and they ask for more and more and then set up calls to clarify some items that they have discovered. All the while, they’re gaining more clarity into your business.
Do you think that a Private Equity group that owns a DSO will sell to the first group that provides them an offer? No. There are over 100+ PE-backed groups in the U.S. today, and I would venture to guess that none of them would take an unsolicited offer. Why? They know how the game is played – they made the rules. They know that the only way to maximize the value of their investment is to go through a marketed process. Even PEGs want an M&A Advisor / Investment Banker to help them prepare their business for sale and drive a competitive process. Competition and deal tension drive up value.
Private Equity Groups understand that they need to prepare to sell to maximize their value. When they submit unsolicited offers, they know you are not prepared and look to take advantage of that. It is how the game is played. If you are going to play the game, know the rules – get an M&A Advisor and win the game.