As two of the most experienced dental brokers in Australia, we remain amazed at the persistence of the scaremongering that occurs surrounding the experience of selling to large dental corporates/aggregators. In this article, we thought we would address some of the more commonly heard arguments against selling to dental corporates/aggregators.

ARGUMENT AGAINST DENTAL CORPORATES 1:

“I will not consider selling to a corporate. There are horror stories out there from people who sold to them.”

We don’t doubt that these horror stories exist (we have heard some of them), but:

1. Sometimes work conditions deteriorate post sale, due to an incompatibility that emerges between the buyer and the vendor. In our experience, an incompatibility like this is rare and no more or less likely if the buyer is a corporate or a non-corporate buyer.
2. If you heard a dental corporate horror story, the chances are that you only heard one side of the argument… the vendor’s. There could be (and often is) another side of the argument – the buyer’s…or parts of the story that were not told to you by the vendor that may provide a valid justification of why the corporate acted as they did. 
3. There are many dental corporates out there. Even if the story you heard was accurate and the corporate in the story was unprofessional/unethical/in the wrong, I don’t think it follows to say that all corporates act unprofessionally or unethically. We have heard plenty of cases where dentist owner-operators have done the wrong thing, yet no one extrapolates from there that all other dentist owner-operators will act the same way.
4. They say that a bad story spreads 10 times faster and 10 times further than a good story. PSS has sold many practices to dental corporates every year for the past 15 years, and I can attest to the fact that there are far more success stories than horror stories. People who are enjoying their post-sale lives just don’t seem to tell people with the same volume and frequency than someone who isn’t.

ARGUMENT AGAINST DENTAL CORPORATES 2 

“Corporates are taking all the good practices off the market, leaving less for owner-operators. It is impossible for an owner-operator to compete with a corporate when buying a good practice, because the corporates have deeper pockets and can afford to pay more.”

I have two main arguments against this myth:

1. Owner operators and corporate/aggregators being interested in the same practice is not as common as you would think.

Dental corporates are only really interested in a very narrow subset of practices that are for sale. They are interested in practices that are:

• General practices (they don’t generally buy specialist practices)
• Having at least 3 chairs (or 2 chairs with the room for 3 chairs)
• Grossing well over $1.5M and have substantial EBITDA (operating profit) of over $300k after paying all expenses (including the principal dentist commission @40%)
• Not key-person dependent (less than 40% patient billings coming from any one clinician)
• In easily recruitable locations.

There are a huge number of great practices for sale that exist outside of the above corporate criteria. 

At the same time, it is important to note that very few owner-operator dentists seem to have an interest in practices with a justifiable valuation that goes beyond $1.5M. Certainly (with few exceptions), practices with a price tag over $2M seem to be almost exclusively corporate/aggregator-buyer domain.

Without dental corporates, these practices would either be unsellable or have reduced appraisals. While reduced appraisals may seem good for buyers, I am not sure you would agree if you owned a practice and through hard work and ingenuity were able to grow it to a place far larger and more profitable than others. You would be justifiably upset if you could not get proportionately compensated for what you built.

2. Where you are competing with a corporate, owner-operator buyers have several advantages in negotiations over corporates:

a. Owner-operators can compete on terms. Dental Corporates generally don’t buy practices that allow vendors to exit quickly or pay 100% upfront or without future targets. 

b. Owner operators can compete on compatibility. Many vendors prefer the idea of selling to a person, rather than a company. 

c. Many practices are worth more as a job than as a business. A corporate will only put a value on the profit of the business after the principal dentist has been paid for their clinical work. They won’t put a value on the dentist’s high remuneration, good hours, long holidays and many other attributes that would be of interest to a dentist owner-operator.

ARGUMENT AGAINST DENTAL CORPORATES 3

 “Dental corporates focus on profit to the detriment of the staff and patients”

Statements like this are the antithesis of the image that any health businesses would want to project to the world.

As much as any dental practice owner tries to project that they are virtuous, community minded and only in it to help people… they are, at the end of the day, owners of businesses that also exist to make money. There are certainly instances out there of practice owners:

• Violating employee rights by short paying, having them work on contracts and under conditions that are not legal and/or not compliant with Australian standards. 
• Jeopardising patient safety in practices by not monitoring poor clinical work, or not applying rigorous sterilisation and WH&S protocols. 

However, I should add:

1. These types of lapses are extremely rare AND
2. When they do happen and end up being reported in the newspaper or AHPRA, they are much more likely (in our experience) to have happened with experienced dentist owner-operators who are just running an old or loose ship and cutting corners with compliance, than with dental corporate aggregators trying to maximise profit. 

Conclusion

We want to make it clear that we are not defending all dental corporate aggregators, or saying that all dental corporate transactions and their aftermaths are smooth. 

What we are saying is that corporate acquisition of dental practices:

- is not the ruthless boogeyman that many will make it out to be,

- that many of the arguments given against dental corporates are arguments that could easily also be said of some privately owned practices AND

- can absolutely be the right choice for some practice owners looking to sell.