Today's Veterinary Business

AUG 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

Issue link: https://todaysveterinarybusiness.epubxp.com/i/1007483

Contents of this Issue

Navigation

Page 17 of 75

14 Today's Veterinary Business Business Corporate consolidators get all the attention these days when the topic is practice sales. As a generation of veterinarians reaches retirement age, the number of practices available to purchase is greater than the number of private practitioners ready to buy. If consolidators can and will pay more for a hospital than an associate veterinarian can afford, why would a practice owner consider selling to a colleague, or any private buyer for that matter? Many sellers are asking, what would be in it for me? By Leslie A. Mamalis, MBA, MSIT, CVA The Purchase Price Rumor has it that corporates can and will pay much more for a prac- tice than an associate can. Howev- er, consolidators will not pay signifi- cantly more than fair market value for most of their targets. In fact, the price offered by a corporate might be very similar to the amount of financing an associate qualifies for from a traditional lender. It's true that consolidators have readily available cash and that in a bidding war they usually can outbid a private veterinarian. Consolidators have deep pockets; associate veteri- narians generally do not. Associates must rely on the earnings generated by the practice to cover debt payments. Banks will not lend more money than the earnings can support. Lenders are not investing in the practice; they want assurance that the loan will be repaid. That said, some banks offer creative financing to help as- sociates meet a high asking price. Veterinarians looking to own a practice should investigate all options for private financing. The Method of Payment Selling to an associate veterinarian might mean you carry part of the loan. This is not an onerous re- quirement. In fact, doing so shows the lender your confidence level. Under such an agreement, the seller receives the bulk of the purchase price immediately and finances the remaining 10 to 15 percent. The lender often dictates the terms of the loan, sometimes specifying that the length and interest rate match those of the primary loan. A Matter of Timing Selling to a consolidator is a fast process. The time from signing the papers to closing the deal can be as little as six weeks. Con- solidators might acquire several practices each month, creating a cookie- cutter process. Selling to an associate takes longer because neither of you transacts deals for a living. Your associate hasn't done it before, and you might not have, either. Both of you need time to work through the details with the assistance of attorneys, accountants, consultants or brokers. Completing the transac- tion could take six months or longer because neither buyer nor seller is familiar with the procedures. The Real Estate An associate will be interested in buying the real estate either imme- diately or within five to 10 years. Owning the real estate becomes a priority so that the buyer can control the facility rent and own an additional asset. If you sell to a con- solidator, the company might have no interest in owning the property Business MONEY MATTERS Overall, selling to an associate creates much less anxiety for others in the practice than selling to a consolidator does. When selling to an associate makes sense Consolidators possess deep pockets, but practice owners might welcome a partner's offer when the property itself, creative financing and even one's legacy are taken into account.

Articles in this issue

Archives of this issue

view archives of Today's Veterinary Business - AUG 2018