Thinking of Selling Your Veterinary Practice in the Next Three Years?

Posted on November 3, 2020

Part 1 of 2

Increasing  Your Veterinary Practice Value

Veterinarians face a changing economic landscape and a consolidating industry. So it’s no secret that many practice owners are considering if they should sell now, or perhaps prepare their clinic for sale in the next several years. The major question we always hear is: “How do I get the most for my practice and really capture what I believe it’s worth?”

This article addresses many of the key points a potential veterinary practice seller should consider.

*Please note that every clinic is different, so a tailored analysis of your business is required to assure that your decision makes sense for you and your family.

A Veterinary Practice Sale Can Take Different Forms

There are several basic scenarios related to the sale of a veterinary practice. Here are some of the most common ones:

The Stand Alone

The buyer acquires the assets of your practice for cash.  The buyer continues to run the hospital as an ongoing business at your current location, most likely maintaining the brand you have built (not changing the name of the clinic). If you own your real estate, it may also be purchased or leased by the acquirer (most commonly it is leased).  The practice owner would generally continue seeing clients and potentially continue to be the managing veterinarian for a period of time.

The Fold-In

The buyer purchases “selected assets”– usually your practice client list, some equipment and hires your associate veterinarians. In this scenario, the buyer generally folds your operation into its existing nearby practice.  This is common for much smaller practices (1-2 veterinarian clinics).

The Partial Sale

The acquirer purchases less than 100% of the business, and the existing owners retain an equity stake in the business. The practice owner would generally continue in a day-to-day management role.

This column focuses on the first option, The Stand Alone acquisition.

How Are Practices Traditionally Valued?

Veterinary practices are generally valued on a multiple of normalized EBITDA (which means Earnings Before Interest, Taxes, Depreciation, and Amortization). The term normalized (or adjusted) EBITDA refers to excluding those expenses that are either one-time expenses or those operating expenses that the buyer would not continue to incur after the sale. The latter group generally consists of perks or specific owner-benefit related items.

Buyers traditionally pay a “multiple” of the normalized EBITDA figure. Selling multiples for veterinary practices have been ranging from in the high single digit to low double digit multiples of EBITDA –sometimes higher depending on the profitability, number of providers, locations and growth potential of the practice. If real estate is purchased, that price can be negotiated separate from the price for the business. Traditionally, practice owners must pay off long-term debt from the proceeds of the sale.

If we can be helpful to you, please call us – we are happy to have a confidential conversation with you regarding the acquisition market and your situation.  We would be delighted to help.

Additional Resources:

About Keiter Advisors

Keiter Advisors is a full-service transaction advisory group serving companies in middle market M&A transactions and financing. KA is recognized as the national leader in assisting owners to:

• Buy or sell foodservice distribution, meat processing and produce companies
• Plan and execute transition strategies, including family buy out initiatives and third party sale
• Examine the profitability of their business and develop viable improvement programs
• Renegotiate existing financing arrangements and secure new lenders