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Purchaser Due Diligence Part 2

By January 14, 2014June 27th, 2023Buying a Practice, Selling A Practice

In this blog, I’m going to be talking about what happens when a purchaser comes across a practice that earns higher than average billings. Once in a while, we see a practice where the principal dentist is able to command a premium to the fees stated in the Ontario Dental Association’s Fee Guide. This premium may be 25% or more. This is particularly true where the selling dentist has been involved for many years in complex cases (e.g. large crown and bridge cases, implants, etc.), is well known for their specialty, and has a large patient/referral base.

So the problem for the selling dentist is this: the purchasing dentist may not be able to command the same premium because of their lack of knowledge, skills, experience or reputation. So that’s where a clever dental lawyer or dental accountant would come in and advise the purchasing dentist that the gross billings for this particular dental office need to be “normalized” for them. In other words, the premium to the Ontario Dental Association’s Fee Guide, which the selling dentist would be able to charge, would have to be removed for the purchaser. Without this premium, the practice does not look as attractive and will not command as high a premium.

But there is a caveat. If the selling dentist has an associate who can also command the premiums, then the purchase price will be higher than it would be otherwise. So it’s in the selling dentist’s best interest to hire on and develop an associate to buy them out in the future.

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.