When a dental practice owner is looking for ways to grow their business, they usually look in a few predictable places: advertising, marketing, new clinical services, treatment presentation. All of these can, of course, have degrees of success, depending upon how well they are executed. However, there is another avenue with a great success rate that is open to practices, that is rarely explored…a “practice merger.”

In essence, a practice merger involves the purchase and complete movement of a seller’s practice into a buyer’s (usually larger) facility. Practice Sale Search is involved with several of these transactions each year. Done right, a practice merger is the best investment a dentist could ever hope to make in their lifetime, for several reasons:

1. It means investing in a business you already know…it beats the usual dentist forays into investing money into areas where the dentist often has little knowledge or understanding, like property development, or buying into a restaurant.
2. It can eliminate a competitor. Even if the practice that you absorb is small and not a threat, buying a practice in your area prevents a more aggressive competitor from acquiring it and competing with you.
3. It increases your market share in the area.
4. It provides more patients, more chances for referrals and more growth. In most cases (especially if the selling doctor is retiring), many of the patients have been in a "maintenance" stage for several years. With the right patient education and care, these patients can deliver a large amount of untreated, or undertreated, work.
5. Higher profitability: A merger should be a very profitable exercise. Much of the additional production that it brings should immediately fall to the bottom line, in the way of profit.
6. Most of the capital outlay (fitout, signage, underutilised equipment) is already paid for. a)Most practices have underutilised surgeries and equipment that can be used in the case of a merger. If they don’t: - A merger usually comes with some usable equipment.- The buying practice can extend its open hours to create underutilised equipment and surgeries. b)Most of the fixed costs of operating (rent, insurance, staff salaries, computer expenses, etc.) are already paid for through your existing practice. c) Buying a patient-base should only introduce variable costs like supplies, lab and the wage of a DA associated with the additional work.
7. Source of experienced staff: In many cases, good and experienced staff is often immediately available with the selling practice.
8. Equipment. Generally, a merger of practices is attractive for a buyer for the goodwill alone and not for the equipment. However, even if the selling dentist’s equipment is ultimately discarded by the buyer, it has some value to the purchaser of the practice, in its ability to be depreciated in the accounts of the buyer.

For a seller, a merger can be extremely advantageous as well.

1. It can give value to busy practices where no premises lease is available and/or the equipment is at the end of its life.
2. It can provide the vendor with a more collaborative and supported approach to dentistry than they had before.
3. It can provide the patients and staff access to work in a newer, larger facility, with a better supported team

Even though these practice mergers can be extremely beneficial to both parties, certain fundamental elements should be in place to maximise the benefits of a practice merger.

1. The two practices need to be fairly close to one another, (you can only expect a patient-base to move so far).
2. The procedure fees need to be within 15%-20% of each other (a patient-base will pay more if they can see that the service is in a better quality facility, but the rise can’t be too significant).
3. From the selling dentist’s perspective, it is best not to have a lease on the premises. If a lease is in place, it would be best if it were a short-term lease obligation.
4. The buying dentist must have a facility that can accommodate the additional patients and/or dentist, or be able (willing) to extend their open hours to do so.
5. The seller should be able to work at least part-time in the purchaser’s facility for a period, in order to maximise continuity for the patients.
6. The website and phone number of the selling practice need to be redirected appropriately.
7. The old premises must be shut in such a way that a new dentist cannot use it afterwards.
8. The seller needs to be actively involved (and in fact incentivised as part of the selling price) to move the patient-base as effectively and efficiently as possible. There are many ways that this can be achieved, and a broker experienced in practice mergers should be able to suggest a few to you.

To read more articles on the Subject of "Seller: Types of Sale" please click the following articles:

• The Delayed Internal Sale: Exit Plan...or ticking time bomb?
• And The Seller Stayed On
• Partnership Exit-Planning: Selling a House that comes with a Marriage
• Internal sale – Who owns the goodwill?