In our last article, we discussed how to prepare your veterinary practice for an acquisition by a corporate buyer. We recommended that you first gather your team of professionals and have them review your financials and practice entity documents. We explained that you will need to set aside time to devote to the process for tasks such as digging up documents and having introductory meetings with the buyers. When you have all your ducks in a row and have decided that you are ready to begin, you will then need to determine which corporate buyers would be interested in your veterinary practice.
How Corporate Buyers Choose Veterinary Practices
Many corporate consolidators base their acquisition criteria on a number of factors, starting with geographic location. While the big dogs are nationwide, there are also some smaller corporates popping up all over the country that are specific to a particular geographic region. Their pockets may not be as deep as the larger, older companies; however, they may have a strong infrastructure in your area and may be able to provide you with better support. They may also offer you a future career opportunity in their local corporate office.
Location also matters because as the smaller companies grow, they strategically pick the next market where they are potentially expanding. If your practice is located in that market, they may be willing to pay top dollar to acquire you.
Your pool of prospective buyers can vary depending on the size of your practice. A few factors that buyers take into consideration are the following:
- Number of veterinarians employed at the practice
- The practice’s gross revenue for the previous year
- The presence of year-over-year growth
The size of the hospital building can also influence buyers such as:
- Number of exam rooms
- Extra space that can be converted into additional exam rooms
- Multiple floors in the building
- Space on the property that could accommodate expansion of the building and future growth
The type of hospital will also determine who is interested in your practice. Some buyers are interested in acquiring specialty and emergency hospitals, while others only want general practices. There are corporates that are in the market for equine and mixed animal practices, but many only acquire small animal hospitals. If you are the owner of an equine facility, make sure the buyer you are entertaining has experience and is able to support your practice. It can be risky to sell to a “newbie” who is just dipping their toes in the water and wants to start with you.
How Practice Owners Choose Corporate Buyers
Once you reach out to the various corporate buyers and determine who is interested in reviewing your practice, you can then begin getting to know them while asking yourself the next question: which of these buyers would be a good fit for your veterinary practice?
Consider the type of management style you would prefer in a buyer. Some practice owners need to have more control and may want to continue running the show after the sale, while others have had enough of the business side and would prefer to step back. Would you like a company that is highly involved and takes over all of the management duties so you can just focus on medicine or would you prefer a company that is a generally hands off?
You can also ask the buyers for a list of references. They should be able to provide you with contact information for practices they have recently acquired in your region. Be sure to speak with both the former owners as well as the practice managers to get the inside scoop on what it’s like to interact with the company on a day-to-day basis. Talk to someone who closed a few years ago to see how they are doing today. Did all of their doctors quit? Is the majority of the staff happy? It’s also helpful to speak with someone who closed more recently and is still going through the transition process today.
Corporate buyers offer different types and levels of employee benefits. Some buyers say that they will keep your staff whole by making adjustments to their hourly rate/salary if their benefits are not as good as what you are currently offering your staff. You certainly don’t want your employees to have to take a pay cut or pay more for insurance after the sale. That would not be good for employee morale. You may want to ask the buyers what kind of discounts they offer the employees. You could provide the buyers with a copy of your employee manual to confirm that their company would offer similar perks and benefits.
Another aspect to consider is how you may feel about the buyer making changes after closing. Some will show up on closing day and immediately switch your practice management software over to their system. They could also change vendors including the reference laboratory or even your in-house lab equipment. It’s something to consider because your employees would then have to learn how to use all new machines. Other corporate buyers choose to continue using all of your current vendors and don’t really change a thing, or at least wait until the dust settles.
The best way to determine whether a corporate buyer would be a good match for your practice is to get to know them. Through phone calls, zoom meetings or in-person meetings, practice owners gain the opportunity to ask questions and get to know the culture of each company. Keep in mind, that most owners continue to work after the closing and their buyer becomes their future employer. Ultimately, you should ask yourself if you would want to work for this company.
In the end, the decision to choose a buyer often comes down to the purchase price. Many, if not most owners are counting on the funds from their sale to enable them to retire down the road, so the final number is important. However, it’s good to do your homework because if you have two similar offers, you will be giving the other factors some serious consideration.
If you are fortunate enough to receive multiple offers on your veterinary practice from corporate buyers, you will be faced with making one of the most important decisions of your veterinary career. In our next article, we will explore the various types of offers and sale structures.
