Three years ago, Sherry Weaver, DVM, was completely opposed to the idea of a practice consolidation or sale. Giving away control of the veterinary hospital she established 20 years ago was something she never thought she would do.
“I was adamantly against the whole model where someone says, ‘We’re buying you, and you’re going to become us,’” said the founder and medical director of Animal Hospital of Towne Lake in Woodstock, Ga. “I never did understand it because my practice has been successful, and I didn’t think anyone would improve that.”
Dr. Weaver’s thoughts changed on the Veterinary Meeting & Expo (VMX) floor, though, when she dropped by the booth of a veterinary corporate sales and transition partner group. In a short conversation, she learned selling majority ownership in her practice did not mean abandoning her staff, moving locations, or dismantling what she had built. This was when Weaver started to take the idea seriously.
Today, she is still at the clinical helm of the successful joint venture with National Veterinary Associates (NVA). In fact, through the partnership, she realized a career-long dream—her practice expanded to 24-hour care in September.
What’s behind the sales market?
Weaver’s story is not uncommon. As of 2019, the Internal Revenue Service (IRS) reported 77 percent of veterinary practices in the United States are corporate owned. The market for veterinary practice sales is white-hot, said Gary Ackerman, DVM, president of Ackerman Group, a veterinary transition partner company, and it shows no signs of slowing. Corporate buyers see these practices as stable investments with long-term profitability.
The playing field is large, he explained, with more than 50 veterinary consolidation companies actively purchasing. Many are larger veterinarian-owned groups, such as MedVet or MAVANA, but others are private equity or family-owned firms, including Mars. Within the decade, they are expected to acquire between 5,000 to 10,000 practices—some for potentially millions of dollars.
If you choose to throw your hat in the ring, Dr. Ackerman said, a transition group that specializes in veterinary sales can help you navigate these waters.
Is it the right time?
So, how do you know if the timing is right for a total sale or a joint venture (a majority ownership deal)? Will the move bring benefits? The first factor in your decision could be the stage of your career, Ackerman said. If you are in your 60s and eyeing retirement, it could be a logical next step.
In situations of total sale, corporate buyers will likely ask you to work for a few more years to help ease the transition. Think about where you see yourself professionally in three to five years, and consider how much work you would like to do. Are you looking to scale back your hours or are you beginning your transition to full retirement? It is also important to consider the emotional impact of a sale on both you and your associates.
If you are planning post-practice life, pursuing a corporate entity could be particularly attractive, especially if your younger colleagues are not interested in buying you out. They may still be paying down school debt or they could prefer focusing on practicing medicine rather than running a business.
On the flip side, a joint venture may be more beneficial if you are a younger practice owner in your 40s or 50s. You may want to reimmerse yourself in more clinical work, and a corporate partner that can shoulder the daily administrative and management responsibilities, including payroll and recruitment, can be enticing.
What to expect
Once you start down this path, the process can take several months, and there is much to consider. According to Ackerman, there are several steps to a smooth transition.
As an overview, you will first work with an advisor to review your financial plan, get your market valuation, and determine your profit margins. This is your Earnings Before Interest, Taxation, Depreciation and Amortization (EBITDA)—and knowing it can help prepare your practice for sale. After gauging corporate interest and receiving letters of intent, you will enter negotiations to find the best personality fit, terms, and price. Once those details are settled, it can take an additional two to three months to close.
You should still anticipate some challenges. For instance, you could have a lower practice valuation than anticipated. In those cases, you may need to take a couple of years to work on your earnings. Contract negotiations for your associates can also be a sticking point, he said. You may need to provide bonuses to your colleagues to ensure they sign on and continue working with the practice.
There is also a possibility you will encounter real estate problems. If you rent your building, your current landlord may not want to renew your lease given the change in ownership, or you may not have enough room to expand to make new accommodations. Zoning issues could also present a roadblock, Ackerman said.
Keep what you love
While signing on with a corporate partner does mean you will adopt many of their policies and standards, it does not mean you must forego everything you love about the practice you built. There is a way you can safeguard those characteristics, said Mark Epstein, DVM, DABVP, CVPP, co-founder and medical director of TotalBond Veterinary Hospital at Forestbrook in Gastonia, N.C. Dr. Epstein launched his joint venture two years ago with Veterinary Practice Partners.
During your partner search, focus on more than the numbers, he advised. The biggest price tag is not always the best fit. Seek out a partner who holds similar values and the same philosophical approach to running the business. That partner will help you maintain the identity of your practice.
“From a culture perspective, finding the right partner is about focusing on the intangibles when choosing them,” Epstein said. “Look for a company that has the same ideological approach and the same soul.”
Weaver from Animal Hospital of Towne Lake agreed, pointing out frank discussions about what is important to you—whether it is a drug testing policy or keeping a particular employee on board—can lead to palatable outcomes for all parties involved. Speak openly, she advised, and do not shy away from conversations.
In the long run, Ackerman said, companies are drawn to successful practices. Most purchasing partners will be motivated to help you maintain as much of your practice’s character as you can.
“These companies want to keep your personality to some degree,” he said. “They did buy your revenue stream. But if they change too much, doctors and patients will leave, making it more difficult for them to get a return on their investment.”
Ultimately, Ackerman said, if you are considering pursuing a joint venture or sale, your most important step will be to educate yourself. Invest time to learn about the types of partnerships and work with an advisor who can shepherd you through this process.
“Working with a really strong advisor will increase your confidence and help you with all negotiations,” he said. “After all, this is probably the most important financial transaction you will do in your lifetime.”
THREE RED FLAGS TO LOOK FOR
|Most corporate partners should be easy to work with as you forge this new relationship, said Leslie A. Mamalis, MBA, MSIT, CVA, owner and senior consultant at Summit Veterinary Advisors. You must keep your eyes open, though, for any signs you are heading toward a contract with the wrong partner.
“You need to be treated with respect,” Mamalis advised. “If you’re ever feel like you’re not being respected, that’s definitely a warning sign.”
There are several red flags that should send up alarm bells, she said.
“I always tell my clients that they need to remember they are always in the driver’s seat. They can always walk away,” Mamalis said. “Don’t get discouraged because a nice practice is going to get a nice price, regardless of who buys it.
Whitney J. Palmer is a veteran freelance writer based in Holly Springs, N.C. She has more than 20 years of experience covering animal health and human health for various trade publications and journals. She can be reached at firstname.lastname@example.org.