I was approached during the BDIA Dental Showcase by no less than four individuals (in one day) who explained to me that they had funding in place and intended to “buy practices with a view to creating a micro-corporate that will be sold in 5 years.”
The great thing about Showcase is that I can get those conversations out of the way, without having to endure four meals in Marylebone, having the same story rolled out groundhog style.
Maybe what happened at Showcase was a coincidence or maybe it indicates a trend, that institutional money and speculators are back in the dental landscape, spotting an opportunity to make a killing?
I have a number of questions for those speculators and assess my response based on their answers:
- how are you going to manage the fact that the seller’s expectation of value is going to be higher than your valuation?
- how are you going to handle it when, after hours of conversation with the seller, they tell you that their accountant, lawyer, dentist friend or mate at the golf club has told them to hold out for more money?
- who is going to do the real due diligence – not looking at the numbers but interrogating the practice management software to discover what has really been going on at the practice for the last few years?
- given that most sales are “distress” motivated (the current owner has had enough of some aspect of ownership), who is going to motivate the team post-acquisition?
- how do you think the current atmosphere of fear surrounding the GDP fitness to practice witch hunt and the rise of dental litigation is going to affect your desire to grow sales and profit post acquisition?
- how are you going to calculate any reasonable multiple of EBITDA when the Principal(s) are generating over 60% of the turnover?
- how are you going to handle the resistance to change you will experience from the seller’s existing team and their inability to accept your brand standards (if you have any)?
- how are you going to recruit new clinicians when the Brexiteers have forced large numbers of European dentists back home and we are suffering from a skill shortage?
- how do you actually intend to grow sales and profitability (please don’t tell me through digital advertising)?
- who is going to be your ambassador in each of the practices, making sure that innovative change is introduced and embedded?
- how do you intend to differentiate your offer from BUPA, Portman and Dentex, who collectively dominate the market and all of whom have deep pockets right now?
- Oh – and by the way, how do you think you are going to flip, flog or float it? It didn’t work out too well for Carlyle did it? I love the way that “we’ll buy at 6 x and sell at 15 x” trips off the tongue like Sir Philip Green talking about pension fund security.
I could go on – but the stark reality is that, in the main, these questions generate blank looks followed by an expression that reads “this guy isn’t telling me what I want to hear and is popping the balloon of my unfalsifiable hypothesis that I’m going to make a quick killing in dentistry”.
More often than not, I never hear from them again.
We’ll see which of the latest crop of “get rich quick” merchants stay the course (and whether any of them ask for my opinion more than once).