Dos and Do Nots When Selling Your Veterinary Practice
Posted on April 21, 2022
Thinking of Selling Your Practice in the Next 3 Years: Things to Consider.
You have worked hard to build your clinic – staff, associate veterinarians, clients. Now, it all seems validated when approached by someone that wants to purchase your practice. You’ve been thinking about selling your practice, but what should you do next? In this extremely active acquisition environment, knowing what to do and what not to do can make a huge difference in the outcome of a sale of your practice.
Before diving in, address items that are important when preparing to sell.
The “getting ready to sell” phase usually takes some time in both data collection and forward planning. If selling your practice is in the near future, talk to your trusted advisors about what you need to be doing now to get the practice ready for sale.
Talk to your trusted advisors.
If the timing seems like it might be right, it is best to bring in your outside advisors for their perspective. Your accountant, corporate attorney, real estate advisor and mergers & acquisitions advisor should be immediately consulted. They can provide helpful guidance on mistakes to avoid, such as signing a non-market non-disclosure agreement or providing potentially sensitive information to a potential competitor prematurely. Also, your advisors can take the lead in discussions, allowing you to focus on your practice and helping you avoid difficult conversations with a prospective buyer. Your M&A advisor can help provide perspective on a potential valuation range, provide insight into what other buyers may be interested in the practice as well as some helpful things that the practice owner can do to enhance value in a sale process. They can also be helpful in recommending financial items that should be normalized to reach an adjusted EBITDA metric for valuation purposes.
If real estate is involved, your real estate advisor can provide insight on the market value of your property and if you desire to lease the property, can provide with a range of potential lease rates for consideration.
Decide if you are willing to negotiate solely with one buyer.
There certainly can be valid reasons for entering into discussions with just one buyer. However, we have seen on numerous occasions where a competitive dynamic is essential for not only achieving the best purchase price, but also the most favorable transaction terms. This also allows a seller the opportunity to learn more about various buyers’ culture and involvement post transaction.
In a recent transaction, a potential buyer approached a seller about a purchase, received financial information from the seller and drafted an offer. On first glance, the offer seemed reasonable. After the practice owner brought in their advisory team, they were successful in obtaining several additional offers at substantially higher values.
In today’s competitive veterinary acquisition marketplace, there are a host of purchasers that may make sense to acquire your practice and it is often worth the time to figure out what each of them may offer. Think of this as defining your option set – you may ultimately decide to move forward with the original group that approached you, but you will be much better informed about the market value of your practice and can use those data points to negotiate a better deal with the original buyer.