The 4 “F” Words in corporate dentistry
The fact that I joined my friend Gary Chapman from Portman Healthcare for our annual Christmas dinner last night (at the delightful Hawksmoor in Seven Dials) is an indication of just how busy both of our calendars are right now – a happy dilemma.
I’m perversely grateful to Gary – for successfully acquiring a number of my clients over the last three years and, thus, forcing me to get back into prospecting mode and recruit new clients to replace them.
When my work is done, my new client base may well be his next generation of acquisition targets but I’m happy to take that risk and earn the legacy that a Barrow’ed up practice most often fits their bill to join the group.
At this point I hasten to add that Portman don’t pay me for introductions – there is zero commercial relationship between our organisations.
Which begs the question “how come Chris Barrow endorses Portman Healthcare as a dental corporate to watch?
It comes down to 4 “F” words.
A couple of days ago in a typically outspoken blog post, Colin Campbell was less than kind in suggesting that those who are in dentistry for an “exit strategy” needed to think more about long-term patient care and less about their pockets.
I agree with Colin’s point but would add (as I’ve said before) that there really is only one type of practice sale in dentistry – and that’s the distress sale.
So when I’m involved with either a vendor or purchaser in a practice acquisition (and I get called in a lot nowadays), my first question is always to ask “where is the distress in the mind of the vendor?”
My previous blogs on this subject have observed that prior to 2008 the stress was usually financial – the need to pay off a divorce, a tax bill or a heavy debt burden.
Owners didn’t sell to James Hull (and others) because they wanted to be part of a bigger future – they sold because they wanted the cash.
Since 2008 things have changed and the distress sale is usually health related – either physical or mental. Vendors are exiting ownership because the stress of ownership is destroying their well-being – GDC, FtP, CQC et al and the need to keep abreast of a rapidly evolving marketing and treatment planning landscape.
So I counter some of what Colin has said by pointing out that, nowadays, it isn’t always just a race for the biggest cheque and that there are people in ownership who don’t WANT to sell but feel that they HAVE to sell – sometimes to stay sane and/or alive.
They can sell to a predator, a local owner or a corporate.
The only thing I will say about the predators is “caveat emptor” – if you let a bright young thing through the door who offers full price and dives into due diligence then you’d better watch out for his/her last-minute change of heart and reduction in offer in the hope that you will give in after months of distraction, paperwork and legal fees and just say “yes” to get the deal across the line.
Predators drive Porsches (that will bring a flurry of rotten veg) so they are easy to spot.
I’m the business coach who is positioning himself as THE GO TO GUY for the owners who want to grow £10m hub and spoke groups and so I’d rather the ageing vendor sold to a local micro-corporate owner (because that might be my client).
But if that doesn’t fit the bill, then there are the corporates to choose from.
Which brings me back to my 4 “F” words and refer to sale to a corporate as opposed to a predator or another owner.
As a vendor who gives a crap about his team and his patients, you have to ask yourself the following questions:
Flip – is this corporate simply trying to replace one Private Equity owner with another every 4 years with massive short term pressure on multiple of earnings so that the Board can make a butty at the flip?
Float – is this corporate aiming at a stock market flotation so that the Board can make a butty and the future pressure for profit comes from institutional investors?
Flog – is this corporate looking to sell to a global healthcare business so that the Board can make a butty and then……
Fertilise – so that the new owner can cross-sell other products and services to the existing patient database?
If any of these are true then I think Colin Campbell makes a very valid point in his post.
To counter the suggestion that “all” dentists are money-grabbers, let me recount the story of one of my clients who was recently offered 8.25x earnings for his business by one of the aforementioned “F”‘ers (sorry).
That’s the highest multiple I’ve seen in 23 years (and may be an indication of a bubble about to burst?).
When I asked him what he was going to do, he replied with my quote of the year for 2015:
“Its a lot of money Chris but there are X people in this business, some of whom have been with me for years – and they are my friends – I couldn’t do that to them.”
A silent hero in my opinion.
But – if it comes down to selling to a corporate, ask yourself the four “F” questions, refer to Colin’s post and look at yourself in the mirror.
The thing I like about Portman?
There are no “F”‘s (as defined above) – they are in it for the long term.
And “the long term”, as Colin says so eloquently, is what healthcare is all about.
If that changes, I’ll be the first to comment.
My advice to Gary last night (not that he was asking) was to make sure that the 5th and 6th “F” words continue to grow at Portman.
Family – to feel part of a community of top performers who have a bigger….