Mergers and acquisitions (M&A) enable dental practices or DSOs to expand their businesses quickly. Here’s what you need to know about M&A in the dental industry.
M&A happens when a dental practice or DSO acquires another one, with the plan to integrate their assets and patients into one business operation. It helps buyers expand and increase profits without a significant increase in cost. Meanwhile, the process allows sellers to leave their practice knowing that their patients are in the hands of a trusted dentist.
Some dentists integrate with another practice to expand their patient base or spread out the administrative costs required to run a dental practice. Meanwhile, others do so to transition into retirement.
For example, the selling doctor would become an associate of the purchasing doctor and gradually cut back on hours. This also helps transition patients to the new practice and gives the new doctor sufficient time to get to know the patients.
Dental practice M&A can be a quick and effective way to increase profits for an established dental practice. Besides increasing productions, it adds substantial equity to the business by increasing patient count. It can also help reduce competition and increase profitability.
Buyers can gain new patients without paying for marketing and advertising. They can get active patients who have been loyal to the practice they’re acquiring. If the sellers stay on as an associate, the buyers can also gain valuable knowledge and experience.
Whether you’re buying or selling a dental practice, you must make the appropriate preparations to reap the benefits of an M&A. A close collaboration between the buyer and the seller is key to ensuring the success of a merger. Here are the key steps to take:
Before buyers issue a letter of intent (LOI), they should do their due diligence to ensure that the potential office is a good fit. They’d likely request to see the seller’s financial reports and agree on the price they’re willing to pay. (Note: the price stated in the LOI is non-binding.)
The buyer and seller should take stock of both practices’ operating procedures, employee responsibilities, practice management platforms, and philosophies of care. Identify the differences, and create a plan to combine the best of both systems into a cohesive entity.
Employees from both practices should be kept in the loop to facilitate a smooth transition. Be transparent about your decision to sell or buy a dental practice and keep your team current on the merger’s progress.
While working on the LOI, the legal teams from both parties will iron out the asset purchase agreement (APA), which outlines all aspects of the transaction. This step also covers the negotiation of employee agreements (including the sellers’ if they stay on to work in the new practice.)
Teams from both practices must work together throughout the M&A process to ensure a smooth transition. You should schedule team meetings and events to build relationships. Also, share the vision of the new practice and align new workflows with your objectives.
While an M&A is a great way to bring in more revenues, the new practice needs the capabilities to handle the increased number of patients. Look for opportunities to improve cost-efficiency, such as automating patient communications, so your staff can become more productive.
The two practices likely have different internal processes and use different software applications. The new business should upgrade to a single dental practice management platform to eliminate silos, streamline processes, and reduce redundancies.
Cloud dental software allows practices to manage activities at multiple offices from a central location to improve cost-efficiency while minimizing errors and delays. Moving to the cloud also allows you to upgrade the IT infrastructure of the new business without the high upfront costs associated with hiring an IT team or purchasing hardware.
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