Around 2008, my father, Dr. Ben Cumbus, a pediatric dentist from Montgomery, AL, was looking to sell a portion of his practice to an associate. Leading up to that decision to sell, my father worked diligently as a solo doctor each week for over 30 years to serve our city’s children to meet their oral healthcare needs. Although the practice had a humble beginning in a small office park, he moved the business to its permanent location in a beautiful standalone building with a caboose on the front that served as a waiting room for the kids. Over the years, his team and business grew, and the practice (and the caboose) became a bit of an icon in the city.
By the time 2008 rolled around he was seeing second and even third generation patients, he employed 12 team members, and saw close to 100 children a day. He took his team on cruises most years, the team loved the patients and the team loved (and still loves) him. I was lucky enough to experience the culture myself some summers working as an intern cleaning trays, pouring up molds and attempting to bend and solder wire to make space maintainers. I am certain dad lost money on me as an employee, but I always look back fondly on that time as I got to see my father, in his element, doing what he loved during those summers. His practice was a success by every measure: financially, culturally and clinically.
But when it came time to sell the business, it was a challenge. Pediatric dentists were hard to come by. The graduating classes from residency were slim, and there were many years when none of the graduating residence were looking to move their family to Montgomery. It was no fault of the business or my father, there were simply not enough potential partners or buyers for his practice. Although my father ultimately found a fantastic partner who eventually purchased the practice from him, it took years to complete the transaction. I am happy to share that my father, now 72, still works on a part time basis in the practice that he built with many of the same team members he hired in those early, formative years seeing the kids and grandkids of the patients he saw when he first opened his doors. All is well that ends well.
That was 2008.
What about Today?
If my father was looking to sell that same business today, the process would be a bit different. In 2008, the buyer pool was rather limited: pediatric dentists, with a license to practice in the state of Alabama, who wanted to live and work in Montgomery and would qualify for a loan to buy the practice. Over any given year, there may be 1-2 buyer candidates.
Today, the buyer pool looks a bit different. I could connect him with a whole host of buyers, including:
- Private Equity backed DSOs
- Dentist-founded and debt funded groups either pediatric or multispecialty focused
- Orthodontic practices looking to capture the referrals and build vertical integration in their business
- Private equity and family funds looking for that one practice to acquire, learn from and grow into a leading pediatric group in the region
- Pediatric dentists
He would be faced with more buyers offering higher prices than ever before (Remember Econ 101? Increase demand, hold supply constant and prices go up!). Likely, there would be a bidding war for his practice due to its history of success, size, and scale.
I’m not saying that my father would have sold his business to anyone other than another pediatric dentist (In fact, I am almost certain that the outcome would have been the same), but he would have had options.
Valuations and Timing
In 2008, dentists did not have a lot of options when it came time to sell their practice. DSOs were just beginning to gain traction and close to 99% of all practice transitions at the time involved one doctor selling to another doctor. Today, 25-30% of all practices are bought by a group, DSO or Private Equity Group. Times have changed. A lot. The value of a dental practice has never been higher.
- At TUSK we sell practices that regional brokers still sell for 70% of collections for 150 – 200% of collections
- Sales that historically took brokers 3-4 years to sell, we are selling in 6 months (with a bidding war).
- Demand for dental practices far outstrips supply.
Education and Transparency
Selling to a group or DSO is not for everyone. As I shared, I am not sure my father would have sold to one even if he would have had the opportunity. Frankly, I am rather agnostic on the matter of who a dentist decides to sell his or her practice to. But I am adamant that every dentist who owns a practice should be aware of the market today and be informed about the wide array of prices buyers are willing to pay. We make it our job each day to inform the dental community of the opportunities that surround them and work hard to aid our clients in making well-informed decisions about who to sell to and partner with.
If you are thinking about selling your practice in the next 5 years, give us a call – we are always happy to talk with you. We want you to know all of the options you have when it comes time to sell. If you receive an unsolicited offer from a group, DSO or PEG give us a call. They are not the only group who is interested in partnering with you – I promise.
I was lucky enough to enjoy a couple of days skiing in Big Sky, MT with my father earlier this year. He shared with me that he is “serious this time” about retiring completely from the practice after 2020. I nodded and said that he deserved it and that I was happy for him, but in the back of my mind I kind of doubt that he will hang up the handpiece for good in 2021. He loves the practice, the kids, and the team. He is still enjoying a good transition, and at the end of the day, that is really what it is all about.
Meet Kevin Cumbus: Kevin will be speaking at the UAB Dental Alumni Meeting on February 6th-9th in Birmingham, AL. Kevin’s father, Dr. Ben Cumbus, will be introducing him on stage Saturday, February 8th, at 8:30 AM CT to present "The New Dental Economy: The Impact of DSOs, EBITDA & PEGs". Feel free to ask Ben Cumbus if he believes he ever got a return on investment on Kevin when he was a summer intern.
About TUSK Partners: TUSK Partners provides industry-leading resources to group dental practices and DSOs. We help Founder-Owners START, GROW and SELL their DSO. For an overview of our services, please click HERE or visit our website, podcast, blog or YouTube channel.