Thursday, March 12, 2009

Dental Practice Merger Question

I am thinking of a looking for a local dentist to merge his/her practice with… I don't really know much about this legally, contractually, etc. but I need some advice on how to start my search?

What to do?

Well, first things first, why? This will drive your decision on where to start and how to proceed. It’ll drive the type of legal agreements you need and the structure of the arrangement.

For example, if you're looking to "beef" up your existing practice with additional patients and you don't need another doctor, you'll look for a retiring doctor or near retirement and buy their practice. Whereas if you're looking to reduce overhead and you can't handle more patients (excess space, etc,) where you need a doctor to continue to work in the space, you want someone who is probably going to be around awhile where you're space sharing or forming a partnership.

If it's the former, you could send a letter out to all the doctors asking if anyone is looking to retire now or soon and see if they want to transition their practice into yours. If it's the latter, send a letter out asking if anyone’s looking to reduce their overhead by "merging" their practice into yours in either a space sharing arrangement or a partnership.

So, first things first, why?

Why?...

To more efficiently use an existing space by combining patients and some staff plus having more patients being better able to have a profitable hygiene department.

OR.......

In the instance of a partner, to be able to have an infusion of money that would make the practice debt free, free up some time for me while better using the facility....we would effectively have to add one more employee and we would be set.

Ok, so it's the latter of my previous post, looking to have another more "long term" doctor using your facilities with you to help reduce overhead (i.e. "more efficient", "more profitable, "more time off", "better using the facility").

So you need to decide if you're ready and willing to do either one, Have a partner or two, share office space, or three, be the sole owner with the associate doctor slot coming and going (assuming most associates look for a place of their own so they will come and go). Numbers one and two seem like your best bet.

Anyway, either you, or your adviser can send a letter out to all the doctors in a specific area asking for someone that may be looking to share facilities and\or partner up with another successful doctor. Maybe include some of the specific hi-points about your facilities, location (not specific, just whether or not you believe it's a great location), technology, size, staff, ops, etc., how long you've been there, how long you've been practicing, maybe even some specific procedures you do and don't do, enough information to help someone determine if there's a fit.

In terms of contracts, legal structure, you might want to sit down with a dental specific adviser who has done many different types of transactions to get some ideas of approaches. That could be an attorney, CPA, transition consultant, etc., someone that will help guide you to a specific approach that seems to be what YOU want to do.

If number three above suits you better you could also check with a broker in your area for someone looking to sell and begin looking to hire an associate, or, send out the letter asking for those ready to retire.

Good luck.

This post first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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