Dental Service Organizations (DSOs) as buyers have exploded within the dental market over the past several years. Throughout this boom, Choice Transitions has been involved in the sale of numerous, larger dental offices to many different DSOs. Our business model is a seller-driven one, whereby we work solely on behalf of the selling dentists. Therefore, we are often entrenched in negotiating the many provisions that go into making a good transaction into a great one. We accomplish this by marketing to multiple DSOs in order to create a competitive model, resulting in the best overall price and terms for our sellers.
Most DSOs have very large marketing teams and advertise directly to dentists who may be interested in selling because they are attempting to circumvent the competitive model Choice has built. Most often this results in sellers not realizing the full value for their practices, or thinking they are getting the best terms when they have not.
Our DSO experts are often asked, what makes a good offer a great offer? Obviously, the total purchase price offered is just the starting point. However, when you dig into the terms of the deal being offered, there are many other equally important ancillary provisions that need to be negotiated. Typically, these are:
- Length of term the DSO is requiring the seller to remain. The seller’s obligations can vary significantly from one DSO to the next, extending for years longer.
- Post-Closing Compensation. Depending on the competition for your practice, some DSOs may be willing to pay significantly higher compensation levels than other DSOs.
- Rent/lease terms the DSO will pay (even more important when Seller owns the real estate). Again, this is often driven by competition for your practice.
- Tax structure of the purchase price offered. This directly affects how much a seller will net on a given sale price. We have found that a seller’s tax advantages can vary greatly from one DSO verses that of another DSO.
- Percentage of purchase price paid at closing. Not to sound repetitious, but this is also driven by the competitive nature of Choice’s business model. We have found most recently that certain DSOs are trying to have practice owners “roll more equity”, meaning less cash at closing to mitigate the DSO’s risk.
In sum, with the right experienced agent or broker, there is a tremendous advantage to a seller that goes far beyond hunting for the highest offer.
Choice Transitions DSO team is ready to put their experience to work for our clients, and at no fee or risk to our clients.
