How to Successfully Sell Your Veterinary Practice
A veterinary practice typically represents a doctor of veterinary medicine’s life’s work and most significant investment. A veterinarian must take into account certain major considerations prior to, during and post a practice sale. The potential financial windfall from the sale of a veterinary practice can change a veterinary practice owner’s life. At the same time, the transition to a new corporate veterinary owner can have a dramatic impact on your animal hospital, its employees as well as the pet owners who are your customers.
What is the Typical Process of a Veterinary Practice Sale Transaction?
As a first step in the sales process, it is highly recommended that a veterinarian who is the owner of a veterinary practice do a preliminary valuation. Heretofore, this type of valuation required an accounting firm, broker or investment bank to complete. The internet has changed this, and now tools to complete such a valuation can be found on websites like www.vetvalue.pet. VetValue.pet’s Free & Easy Veterinary Valuation tool quickly and easily gives you a range of practice valuations based upon the particulars of your practice.
If the timing is right and the range of estimated values derived from the preliminary valuation are attractive, you should consider the next stage of the veterinary practice sale process. While corporate consolidators are always willing to discuss acquiring practices, we highly recommend you hire an advisor to assure a sale to the buyer offering the best fit, terms, and price. An advisor will initially spend time understanding your practice, its finances and its business dynamics. The advisor may even make suggestions regarding changes or pro forma financial adjustments that would make your practice more attractive in a corporate sale.
Remember, a business broker is much different than a financial advisor. Brokers typically sell practices based upon only the information provided by the veterinary practice owner. Unfortunately, the lack of work done to truly understand the underlying business, can lead brokers to leave money on the table for the practice owner. Not doing the work required to appropriately adjust financials can result in a discount on the corporate sales price.
Once an advisor has finished its initial work, it will compile materials necessary to bring your veterinary practice to market including a financial model. An advisor will also make suggestions regarding which corporate veterinary consolidators might be a good match for your practice. Ultimately, you will decide which corporate buyers represent the best fit your veterinary practice, and you will be introduced to prospective corporate buyers in a “dating” type process. These prospective buyers will ask questions, visit your practice and, ultimately, provide the advisor with indications of interest including terms and price. Guided by your advisor, your decision regarding who to sell to will lead to a letter of intent.
How Long Does a Veterinarian Practice Sale Take
The process will typically take 3-4 months from start to finish. A timeline is provided below:
Week 1: Complete valuation. Interview advisors.
Weeks 2 - 4: Sign advisor engagement letter. Advisor due diligence.
Weeks 4 - 8: Identify appropriate corporate veterinary buyers. Contact buyers. Preliminary buyer due diligence.
Week 8: Letters of intent received from interested buyers. Decision of who to go forward with made based upon price, terms and structure.
Weeks 9 - 16: Buyer due diligence. Documentation drafted and negotiated. Deal closed.
Hiring an Advisor, is It Worth It
You may ask yourself, “Should I really hire an advisor”? Many veterinarians who are practice owners question whether they need a transition advisor, particularly given the fees these professionals charge. Our experience has been that hiring the right advisor is well worth the fees they charge. Indeed, advisors can level the playing field and allow veterinary practice owners to capture the true value of their practices.
So what are other considerations that an advisor will assist with:
- Pricing (multiple of EBITDA)
- Structure, Cash vs JV vs rollover equity
- Employment and Non-Compete Agreements and earn outs
- Associate contracts
- Real estate decisions
- Managing financial due diligence including reviewing personal expenditures, and quality of earnings reviews
- Reviewing all transaction documents including all agreements, covenants, and operating agreements
- Managing disclosure documents
- Review of third party contracts
- Associate contracts
- Debt payoffs
- Third party real estate leases
- Equipment lease payoff
- PPP Loans
- Aiding the integration process by gathering information, setting meeting cadence and creating an integration timeline
- Introduction to or facilitate discussions with wealth advisors and tax and estate experts given the wealth implications of sale
If you have questions about the process, market, and considerations of a Veterinary practice sale please contact: Carson Taylor