Recently, I have met three young dentists who have bought practices under what I can only describe as questionable circumstances.
Three different locations around the UK and yet the audit trail of events that is disturbingly similar:
Existing owner in mid-50’s decides to sell whilst goodwill values are at an historic high;
Sales figures for the year before are massaged to appear attractive;
Valuer arrives and suggests a very high starting sale price;
Naive young dentist arrives, either with family money or (in one case) 90% unsecured bank funding and 10% personal savings;
Young dentist buys goodwill, fixtures, fittings and existing team at the high price;
Former owner keeps the freehold property and offers a lease;
Former owner arranges to stay on as a 50% associate for a reduced number of days per week, working flexible hours.
And then the fun starts…….when the new owner discovers that:
the number of active patients is considerably lower than was suggested in the sales prospectus;
patient records and notes haven’t been kept well;
the practice is not CQC compliant;
patients are keen to see the former owner, reluctant to see the new face;
the existing team are resistant to change and have limited business skills;
general levels of equipment, software and interior decoration are in need of attention;
new patient numbers are lower than was expected;
when the new owner does get to see an existing patient, the level of supervised neglect is alarming;
when the need for treatment is pointed out to existing patients they think the new owner is grabbing money;
the existing web site is an antique;
the new owner has spent all the money on the acquisition are there are no funds for rebranding and marketing.
So three times in the last few weeks I have listened to this story.
The new owners are, at best, concerned and, at worst, bewildered by the situation they find themselves in.
My feedback is, as always, direct and to the point:
you have been sold a problem;
there is little point in crying over the spilt milk;
it’s going to take time, money and people to dig yourself out of this hole;
here’s some idea of how much time, how much money and who the people might be;
with time, money, people and extraordinarily hard work, there’s a chance that you might be able to turn this around over the next 3-5 years – and I’m prepared to help;
if there is no time, no money and there are no people – I cannot help you.
Tough love indeed but I always feel as if these young dentists have already had enough wool pulled over their eyes by “professionals”.
You would be perfectly justified in crying “caveat emptor” at this stage – surely the new owner should have done better due diligence? Surely the new owner should have hired lawyers, accountants and bankers that did better due diligence? Surely the new owner should have interrogated the practice management software to reveal a true picture of the last year’s events?
Maybe so – but they don’t.
What I hear is either – “well my Dad runs his own business/is an accountant and he had a look and told me it seemed OK” or “well the bank came in and lent me the money so I assumed they must have liked the business?”
We continue to have a situation in which young dentists are regarded as lawful prey for those who have neglected their patients, their staff and their premises for years and then decide to jump ship whilst the going is good.
Equally lawful prey for lawyers, accountants and bankers who simply want to charge their hourly rate or collect their arrangement fees and move on to the next deal as quickly as possible.
It disgusts me when I see capitalism operating this way and I’m dismayed when I cannot help and have to walk away and leave these people to their fate.
It’s a pity that somebody doesn’t regulate this conduct and that there appears to be no way to hold those responsible accountable.
I wish that young dentists would contact me before they make the purchase and not afterwards – I’d be happy to assist with that due diligence and point out which cupboards contain the skeletons and where the bodies are buried.