If you missed part one of this article, you may access it HERE.
3. Taking Too Much or Too Little Cash at Close
I love that dental deals these days come with so many options when it comes to the allocation of the purchase price. I also love that every DSOs equity packages are vastly different and come with different risk factors.
Some DSOs offer equity that is trapped at the DSO level, provide no distributions, and can only be monetized when their PEG sells their position. Other DSOs offer equity at the practice level that distributes profits quarterly based off EBITDA and comes with put features that enable you to put the equity back to the DSO when you choose at a pre-determined valuation.
Almost every deal we close comes with the opportunity to roll some of your proceeds from the sale into equity at some level. And each tranche of equity comes with very specific rights, obligations, privileges, and responsibilities. We work closely with our clients to make sure that they understand the risks and the expected rewards that accompany each equity offering.