In this podcast, they discuss the complexities of dental practice sales, comparing holdco equity with joint venture models. They explore how a practice's value can surge during a recapitalization event and the risks involved. They touch upon the benefits of joint venture models and emerging hybrid options for practice sellers.
Consider the financial implications and risks when choosing between hold co-equity and joint venture models for selling dental practices.
Evaluate the balance of ongoing income, diversification, and recap proceeds to make an informed decision on the optimal DSO offer for your dental practice sale.
Deep dives
Different Models for Selling Dental Practices
The podcast discusses different models for selling dental practices to Dental Service Organizations (DSOs), highlighting the variations between the hold co-equity and joint venture structures. In the hold co-model, the dentist sells 100% of the practice but retains stock in the parent company, offering diversification benefits but potentially limiting ongoing income. Conversely, the joint venture model involves selling 51-70% of the business for cash, retaining equity in the practice, and sharing EBITDA with the DSO, ensuring ongoing income but limiting full exits at recap.
Financial Implications and Risk Factors in Selling Practices
The episode delves into the financial implications and risk factors associated with selling dental practices. It emphasizes the importance of evaluating the potential returns at recap for both hold co and joint venture models. The risk of hold co-equity lies in the need to sell 100% of the business upfront, affecting ongoing income, while joint ventures offer ongoing EBITDA distributions but limit full exits at recap, tying some equity to the practice level.
Considerations for Dentists Selling Practices
The podcast stresses the importance of dentists considering various factors when selling their practices, such as the timing of entering the recap cycle and the impact on returns. It explains the difference between hold co, joint venture, and hybrid models, offering insights into diversification, ongoing income, and recap proceeds. Dentists are advised to balance economic aspects with autonomy and fit to make an informed decision when choosing from different DSO offers.
On today’s part-2 episode, Mark continues his conversation with Brannon Moncrief, CEO of McLerran & Associates. They dive into the intricacies of dental practice sales, comparing the holdco equity model with joint venture models. Brannon sheds light on the varying financial outcomes these models can have for dentists, particularly those who have scaled back their clinical hours. They also discuss how a dental practice's value can surge during a recapitalization event and the factors influencing this increase. The discussion pivots to the inherent risks in the holdco model, such as the possibility of doctor turnover post-recap and the difficulties in predicting investment returns. Mark and Brannon explore the benefits of joint venture models, including the advantages of continuous EBITDA distributions and potentially higher returns at the time of recap. Lastly, they touch upon the emerging hybrid models that aim to blend the best aspects of holdco and joint venture structures to offer a balanced option for practice sellers.
For a more detailed exploration of these topics and to learn how these different business structures could impact your dental practice sale, tune into the full episode. Don't forget to follow the podcast for more valuable insights into the dental industry, and for personalized consulting services or strategic advice, reach out to Brannon Moncrief at McLerran & Associates.