Latest / Dental Mentors / The Legal M&A Playbook: How to Maximize Your Practice Exit with Eric White

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The Legal M&A Playbook: How to Maximize Your Practice Exit with Eric White · Dental Mentors

• Dental Mentors: What things should the owner be focused on to really maximize the value of their dental business when they sell? But one thing that an owner should really think about is that their practice in some ways, there's the same dynamics as you'd have as if you were selling your house. If you have a brand new construction and you're getting ready to sell it, it's got top-of-the-line appliances. Any buyer that comes to buy your house will pay top dollar for it because they look at it and say, Okay, this is moving ready. I can just come right in. It's a brand new roof. I don't have to really like discount the price very much at all. If on the other hand, your house is a 1920s bungalow that still has copper wiring, well then any buyer that comes in will say, Okay, wow, like as soon as I buy this, I'm gonna have to turn around and invest some significant money into it. to bring it up to code, bring up to standard, bring it up to the other locations that that buyer may have. And so they're gonna say in their head, okay, gosh, I'm gonna have to spend X hundreds of thousands of dollars to bring this up to code. So that's gonna be an immediate deduction to what that purchase price I would ultimately be willing to offer on that dental practice. Hey there, welcome to another episode of Dental Mentors. I'm your host today, Matt Ornstein, and I have a very special guest today. His name is Eric White, and he's the man one of the managing members at Dykoma Law Firm and based out of Dallas. ⁓ Eric has worked on many, many transactions ⁓ with with my DSO Oak Dental Partners. One of the smartest guys I've ever met, phenomenal at what he does. and his his level of expertise ⁓ you know from from a legal side is you know unparalleled. Eric does work with Brian Coleo ⁓ on the on the Daikama DSO team. And ⁓ I just want to say Eric thanks for being here and and welcome. Thank you. Pleasure to have you. Eric's got one of the best voices in the in the industry. if he wasn't a an attorney, he would be the best like ⁓ talk show host of all time. You're kind, Matt. You're very kind. Good to talk to you. So, ⁓ Eric, just if you could just take a couple of minutes before we kind of get into the podcast and just let the audience know, ⁓ you know, what you do at Daikoma, what your professional experience is, you know, the kinds of transactions that you work on ⁓ in the dental space, whether it's, you know, someone buying a practice, selling a practice, ⁓ working with investment bankers, representing ⁓ Dennis and DSO on any type of legal transactions. I'd love to have the audience understand your background and and area of expertise. Absolutely. Great to great. We'll be happy to do it. Great. Glad to be here, Matt. Thank you. So ⁓ in terms of my background, I'm a transactional attorney, a deal lawyer. So I have been practicing for 30 years now, going on 30 years, and it's been fun. It seems like yesterday in some ways. Some ways not so much. But ⁓ the types of transactions that I handle kind of fall into two big categories, especially in the dental space. On the one hand, I will handle mergers and acquisitions. So as you were saying, Matt, buying and selling of of private companies, as well as then in addition to that, investment or kind of capital ⁓ activities as well. And that would be broadly things such as representing borrowers when they're getting loans from ⁓ you know debt funds or from banks, other types of lending institutions. as well as receiving investments from institutional investors, ⁓ equity investors. So prof so in terms of preferred equity and also working with groups in terms of when they'll make minority investments in DSOs or other types of ⁓ practice physician practice management companies. So you know every it's from everything from on the small end from representing ⁓ single, you know, single owner of dental practices that have two to three locations to working with ⁓ you know very sophisticated ⁓ DSOs like Matt's dental partners with many, many many locations, you know, tens, if not hundreds of locations, and ⁓ helping them while they're looking to affiliate with other dental practices. Yeah. And I I will I will tell the audience, ⁓ y you do a phenomenal job. Your team at Daikoma is literally second to none. And the amount of knowledge and expertise that you and your team have is it's just beyond valuable. ⁓ so, you know, dental mentors, ⁓ we are focused on helping dentists ⁓ you know, maximize their wealth. It's a focus on building wealth in dentistry. And for most dentists, not all, but for most, their most valuable asset is their dental practice or their dental group or their DSO. could be single practice, could be multi, it could be very large, you know, 10, 50, 100 plus practices. So one of the things that, you know, I w would love to pick your brain about is what are the things from your experience that a a doctor needs to be aware of when they're growing their practice, maybe taking in additional capital in preparation to sell their business, their dental business, and what things should the doctor be or the owner be focused on to really maximize the value of their of their dental business when they sell. Like you can just kind of skip around, but I I'd love your feedback and expertise on that, please. Absolutely. So, you know, the one thing that ⁓ an owner should really think about is that their practice in some ways is like like when when they're getting ready to sell their practice. It's in many ways, there's the same dynamics as you'd have as if you were selling your house. So if you have a brand like a brand new construction and you're getting ready to sell it, it's got top of the line appliances and everything. Well then any buyer that comes to buy that to buy your house will pay top dollar for it because they look at it and say, Okay, this is moving ready. I can just come right in. You know, it's a brand new roof. The roof you know, I don't have to worry about replacing a roof unless there's weather damage for twenty years. So I don't have to really like discount the price very much at all. If on the other hand, your house is a nineteen twenties bungalow that still has copper wiring and maybe asbestos, you know, ceiling tiles and things like that around, well then any buyer that comes in will say, okay, wow, like as soon as I buy this, I'm gonna have to turn around and and and invest some significant money into it to, you know, bring it up to bring it up to code, bring it up to standard, bring it up to the other ⁓ locations that that that buyer may have. And so they're gonna say in their head, okay, gosh, I'm have to spend X hundreds of thousands of dollars to bring this up to code. So that's gonna be an immediate deduction to what that purchase price I would ultimately be willing to ⁓ you know, offer on that dental practice. And so because of that, ⁓ when I'm talking to dentists, I usually like to have them focus on a few things, right? You want to to continue the ⁓ analogy, can you know, get your house in order. So there's a number of things that should be done in order to do so. So one of the things is, and this is going to be one of the most important ones, is the ownership of the dental practice. If ⁓ you are a single owner, you've and and you've always been that way, then it's going to be a lot cleaner in terms of dealing with the ownership structure. And so then we would focus on things such as making certain that you have ⁓ dotter your I's and cross your T's in in terms of keeping up with the with the necessary state registrations and your franchise taxes to make sure that your ⁓ entity does not ⁓ lose its status, becomes inactive or something along those lines. If on the other hand, at some point in time you had some co-owner and you'll want to make certain before you get to the time to sell, that you have really made certain that that co-owner has exited. They may, you know, it might have been on good terms, it might have been on bad terms, but you want to make certain that if you had a shareholders agreement, for example, with that old owner, that that that that ⁓ agreement has been terminated, that you've gotten back the shares or the ⁓ limited liability company units or interests from that prior ⁓ owner and make sure you've got the documentation for that. Getting a lawyer to help you with those pieces of it will be critical to make certain that you can show that, yep, I own this practice a hundred percent. Or I or I own eighty-nine percent of it and I can get my eleven percent owner to sign it and and you know, transfer it over to you buyer like with no issues, right? So that's gonna be one of the main things that you'll wanna do. You'll wanna look at any sort of ⁓ agreements that you have along those lines. If on the other hand, you also like if you currently have a partner, you will want to look at the governance documents to see how you can transfer either all the assets or or the equity in that dental practice. ⁓ if you have a limited liability company or a professional limited liability company, PLLC, there will be either a operating agreement or a limited liability company agreement, just depending on the state. It's serves the same function, same agreement. It just depends on the state what the title of it is, what what the formal name of it is. And you'll want to look into that document to look to ⁓ determine what are the ⁓ ways and procedures for making decisions. for large for large actions such as that. ⁓ it might be that it might require 100% approval to be able to sell all the assets or to be able to sell the equity. ⁓ it might be that it's some number less than that. ⁓ it might be that you might need to ⁓ go through a formal valuation process, for example, to be able to ⁓ transfer, you know, so there can be a lot of different restrictions that are in those types of agreements, Matt. And so Making certain that the owner understands kind of the ownership piece of it, how it works in terms of who can vote, who has a vote, who doesn't have a vote, if there's any restrictions on selling shares. ⁓ those types of issues are going to be ⁓ paramount when you're thinking about selling your practice and kind of realizing upon that value you've built up over time in that dental practice. Yeah, that's great, great advice. So I'm I'm gonna kind of distill this down a little bit. ⁓ a little bit more simply when someone is ⁓ getting ready to sell their dental practice or their dental group, they need to have their house in order. And there are a lot of components that go into that. I mean it's like way more than I ever imagined. It's very, very complicated. You know, y you've got you know you gotta be checking on compliance, insurance, lease agreements, excuse me, employment contracts. ⁓ you know, a whole litany of ⁓ of of items. And the great thing is like if you if you try to do that yourself without a world class attorney, it really will bungle up the whole process. So that's one thing I love about Daicomo, you guys have done so many transactions. You know every step from A to Z that a dentist or an owner is going to go through to get to the finish line. And you're able to guide your clients every step of the way to make sure that all the documentation is in order, that it's correct, and that nothing is missing. Or you sometimes you're able to, you know, Dycoma will identify some things that could become problems down the road. And you guys work with the doctors or the owners to get everything in order, clean up anything that needs to be cleaned up. So when the right buyer comes along and the buyer starts going into the data room and looking at all the documentation and there's a lot of it. Everything's everything's in perfect order, which then allows the the selling d ⁓ dentist or owner to really get maximum value in the best terms for their practice. Is that a good summary? ⁓ absolutely. So for example, right, you like you mentioned, one of the key areas that any sort of buyer would look at would be ⁓ the leases, the office leases, ⁓ or lease. And so I can't tell you, Matt, how many times, you know, like we'll work with a doctor and ⁓ They'll I'll say, okay, well give us the copy, the copy of your current leases. Lease. And so they'll give it to us and it's a lease that's amendment number six. And they give us the original amendment and they give us an unsigned amendment number four. Right? So there's gaps there. And so being maybe able to get your hands on hopefully signed versions of all those, like ⁓ of the original lease, as well as all the amendments to date. is going to be helpful because what's going to happen is a buyer won't know what happened at amendment number two. Amendment number two might have been the critical amendment where ⁓ instead of having a ⁓ annual escalator for like of your rent of two percent as you had in your original lease, because of market conditions, it went up to eight percent. Right? So that would be very critical to know as a buyer to be able to, when they're looking to model cash flows and looking to see how profitable the practice could be. And if they are assuming that it's at two percent, the escalator, the the the rent escalator is at two percent and not eight percent, that's gonna lead to some wildly different numbers, wildly different valuations, wildly you know, wild well, excuse me, wildly different EBITDA and wildly different valuations based on EBITDA. Yeah. So and you wanna have you want to have all that stuff in order because if you get to the close to the finish line, And there are documents that are not compliant ⁓ or missing documents. All it's going to do is just slow the process down. And and you know, there's really there's no need to have to go through all of that stuff. ⁓ can you talk, you know, you see you guys see a lot of transactions and one of the ⁓ you know one of the important metrics is making sure that the clients you represent don't have any unnecessary liability after they sell their practice. And, you know, you y you need an attorney to go through the documents because there's a lot of fine print and a lot of legal ease and legal jargon that, you know, most people don't understand. And if you don't have the right attorney with the right kind of expertise to go through and red line the documents and make sure that the documents reflect what you thought they were going to be reflecting. you can wind up in in quite the briar patch post closing. So I always tell everybody like one area you never skimp on ⁓ in dentistry are the quality of the attorneys and firm that you use to represent you. Because a regular attorney that doesn't have experience in dental might save you a little bit of money on the front end or i in the the middle of the of the game, but that can end up costing you ridiculous amount of money. later on in post closing. So I'm always a big believer, like don't be penny wise and p and pound foolish. Mm-hmm. Yeah, this is this is one of the most cup important components for any any dentist that's trying to build wealth is proper legal representation, not just in dentistry, but in in any type of aspect of of their life, especially ⁓ when it comes to building wealth and asset protection, you know, ⁓ proper tax strategies that are compliant, things like that. Yeah. No, I I can't agree with you more, Matt, because, you know, like on the one hand, there's there's all kinds of things that are that are specific to dentistry that, you know, conceptually a general attorney could if they s sat around and thought about it, would come up with it come up with these issues, but they wouldn't necessarily. So for example, things like if you're ha like if you're ⁓ selling your practice, how do you deal with patient credits and and ⁓ any sort of refunds, right? So And dealing with your accounts receivable, right? And any sort of ⁓ credits against your and so patient credits would be credits against your accounts receivable. And how do you deal with that? Are those gonna be things that are gonna remain with the seller? Are they gonna, you know, go with the buyer and the buyer's gonna be the one to deal with them? Well, how do you as a seller know that the buyer's gonna actually collect the AR and and turn over whatever has been agreed to being turned over to you, right? So those are the types of issues that and and mechanisms for how you can deal with that from what we commonly see would be just one small example of that. But then, you know, and so, you know, your ⁓ question really kind of focused on the types of liabilities that would be in the purchase agreement, right? So, you know, just going just taking a step back for a second, right, in that purchase agreement that will ultimately be signed, that's going to say that, okay, for, you know, why dollars, I'm gonna, you know, you're gonna sell all of your assets, you're gonna sell the equity of your dental practice. Right. But in addition to that, there's going to be certain statements that you're going to make about your dental practice, whether you're selling the assets or the ⁓ or the equity. Things such as, for example, ⁓ my dental practice is a professional ⁓ entity that is incorporated in the state of Massachusetts. And it's got, you know, ⁓ five full-time employees, and I've got no independent contractors and you know, all sorts of kind of relevant information about that practice. And ⁓ the r and and the the buyers asking you these things because it all goes into what the purchase price would be for buying that practice. And if there's a mistake being made about some of those representations about the dental practice, well then that means that potentially the buyers pay too much for that dental practice. And so therefore they're gonna want to be able to get back some of the purchase price ⁓ that they paid mistakenly or or in error. ⁓ because of those misrepresentations. And that would mean a claim under an indemnification provision, for example. ⁓ and if there is not an ⁓ if there isn't an indem an indemnification provision, there would just be a like a lawsuit under just common law saying, hey, ⁓ I was sold something that wasn't exactly what I was told it was going to be and I need to be able to sue and get it back. So ⁓ either way, the seller could have liability under that agreement. And so what we do and what we ⁓ work on with our clients is number one, lining up with them all those representations and warranties and make sure that they're actually true or as true to the best, you know, knowledge of that seller. I there's there's gonna be some things you just don't know. I mean, like we like one like one of the pieces that like one of the representations that's always made is that ⁓ the ⁓ the dental practice and ⁓ the office space that it's in is complying with all environmental laws. Well most dental practices I would say are situated in ⁓ real estate that the dentist doesn't necessarily own. And if that's the case, they've got a landlord. And that landlord's really the one that's responsible for things such as if there's in like in the next suite over, ⁓ storage barrels of, you know, cancer causing agents and liquids and, you know, petroleum products and all that, right? That's on the landlord. That's not on the dentist owner that's in, you know, ⁓ in their ⁓ dental space and working and seeing patients and, you know, like that sort of thing. So You know, those are the types of things where, you know, in the purchase agreement you would have a knowledge qualifier qu ⁓ knowledge qualifier, excuse me, that would say something like, To my knowledge, the ⁓ the space is compliant with environmental laws. And, you know, you can have regional minds differ in terms of who should actually bear that risk or not, but it like those are the types of things that you have to deal with. But I would also say there's other types of risks when that ⁓ owner sells their practice that they also need to be concerned about that's not necessarily residing inside the purchase agreement itself, but other ⁓ other agreements, other relationships that they have. For example, if the ⁓ owner actually owns the real estate, a lot of times, especially if it's kind of brand new, a new build or some sort of renovation or something like that, they'll go to a bank and say, Hey bank, I need to borrow some money. I need to r I renovate this space or I'm about to buy it and you know, take over this new location from a from a third party seller. And ⁓ the bank will say, okay, we'll do that. ⁓ like we'll lend you the money to buy the land, but we're also going to put on the hook either the dental practice or you, dentist, personally, on that loan as well, like on that real estate loan as guarantors. And so if you sell the practice and you remain as a personal guarantee on the loans that the practice is responsible for paying. That could be either for kind of equipment, ⁓ like for equipment loans or for ⁓ just term loans from a bank for either real estate acquisition or for other acquisitions, then that would be something you'd wanna keep an eye on and make sure that you get ⁓ r release from, or if there's other sorts of kind of contractual obligations, right? If there's ⁓ any sort of regulatory licenses or the typical sorts of regulatory licenses in terms of like hazardous waste pickup and those types of things. You'd want to make sure there's a nice clean break when you're dealing with those types of ⁓ liabilities as well. Yeah. Great advice. So, you know, one thing I didn't mention is we we've been talking about legal perspective if you're selling, if you're a seller and you're about to get a a huge check. but Dykoma and yourself also represent dentists who are buying practices. Right. So y you represent we've been talking about if you're selling your practice, but if you're growing your dental group, you're a buyer. And then ultimately you're gonna be a seller. Right. So most of the journey is if if you have more than one office, either you if you're not doing de novo, ⁓ you're gonna be buying more practices and then ultimately selling. Like that's that's the game plan to really build wealth. So whether you're buying or selling, it's the same same same principle. You really need great legal representation, whether you're buying or selling. Like we're in buying mode and we've been in buying mode for five years. ⁓ but then when we go to sell, we're now we're in selling mode. And I remember when we bought our our our the DSO we had ⁓ it had twenty practices and I have to tell everybody the amount of pages in that agreement, I was on a ski vacation and it literally ruined my vacation because I was Wor I was remember I was on the phone with you, I was calling you in morning, like ten o'clock at night, Saturday and Sunday. Yeah. Yeah. I was spending like six hours a day going back with ⁓ Eric and the seller for the whole week. It was not much of a ski vacation. ⁓ but the the volume of documents to get that transaction done cleanly was hundreds and hundreds of pages. It was crazy. ⁓ so if you're buying, if you're a buyer, you need proper legal representation. If you're a seller, The same the same principle ⁓ applies. So let's just kind of switch over. ⁓ well I have two it's a two-part question. If you're a seller, like what are the top two or three things that you really need to watch out for in the in the in the documentation that either could cause you a lot of trouble later or protect you from that. And then also from the flip side, if you're a buyer and you're buying some dental practices, you know, what things do you really need to ⁓ have the attorneys focus on to hopefully ⁓ prevent any problems. So I'd love to hear from the seller per like if you're representing a seller, what things you need to really watch out for and protect yourself against. And same thing if you're a buyer. Sure. So ⁓ if you're a seller, the first thing is, and we've already kind of touched on this a little bit, is what sorts of liabilities will there be that you'll have post closing? What sorts of strings will be attached to the cash that you receive. Will you have ⁓ are we talking about an indemnification period where you would be actually liable for any misrepresentations that were made in that purchase agreement h for how long and for how much? Are there limits, for example, as to how much you could potentially have to pay based on kind of the kind of representation that there is? You know And all that's negotiable. It's all negoti It is. Absolutely. some buyers may want to act like they're not negotiable, but they are. ⁓ within limits. And so I think that ⁓ you know, there's going to be certain types of representations you'll make about your practice that number one, you like you actually have a practice. It actually exists. it doesn't owe any taxes, right? Besides kind of whatever the the current tax year would ⁓ there would be. Those types of kind of basic representations, those are going to remain for a very long time. And you'll want to have a good sense as to what those are ⁓ and ⁓ how much you have to pay if there's ever a breach. ⁓ the second thing I would say for a seller to really be concerned about would be I mean there's kind of practical concerns in terms of like the transition and ⁓ employees and things like that, but you know, and which which is important because you want to make certain that, you know, you're leaving, or at least what I try to do and what me and my colleagues at Dykema try to do is we want to make certain that our clients understand what the business deal is, they get the deal that they're expecting to get, and they understand kind of what's going to happen next. Right. And so because as you said, we've like we've represented over seven hundred seven hundred clients in this space, what we fe what we've seen a few things. And so we understand some of those pain points, especially on the practical side as well. So but in but in but in terms of like pure legal ⁓ types of issues, I think the other thing would be to really understand what what form of of consideration you're going to receive in terms of your purchase price. Is it all cash? That's great. ⁓ because we all understand cash and and you know the only risk with cash is whatever the Federal Reserve comes up with, right? So I mean it the like that's pretty much what we have to worry about. with respect to other forms of consideration, which also is quite valuable, such as it could be equity in the buyer, it could be a promissory note. that they would give you saying that, hey, we'll ⁓ pay 80%, 75% on the closing date, ⁓ we'll pay you the rest over time, or if it's in connection with hitting s ⁓ if the practice hits certain ⁓ performance metrics and hurdles, that could be another piece of it. And so just kind of really understanding like what type of consideration you're gonna get, what's the time frames for proving that up, and ⁓ going from there. Those are gonna be the two, like from my point of view, the most important things for a seller. Yeah, I'm gonna hop in real quick. So I'm just kind of ⁓ you know, jumping on the bandwagon here, but if you're a seller, there there are there are ⁓ you know two main things that you have to be concerned with and make sure that it's papered up properly to protect yourself. And that's ⁓ n almost nobody gets a hundred percent cash at closing anymore. So you'll get s you'll get some money. ⁓ you know, typically these days it's like around sixty percent. And then there's an earnout, right? So maybe they say, All right, we're gonna do an earnout for ⁓ another thirty percent and we'll pay you ten percent of that amount. Excuse me, we'll pay you one third of that amount each year for the next three years as long as your collections don't go down and you don't leave the practice. There there are conditions to it. And then there's just a holdback for a period of time. You know, typically ⁓ a buyer's gonna say we're gonna hold back 10% of the purchase price For twelve months just to make sure that all of your representations and warranties are legitimate and that n nothing pops up. Like, you know, something pops up in accounts payable for half a million dollars that wasn't disclosed. So, you know, it's it's holdbacks, it's earnouts. And a lot of transactions are happening now with some seller financing as well, where the seller's gonna say, All right, I'll I'll loan you twenty percent of the purchase price or thirty percent you can pay me. five or six percent interest for five years and then you can pay it off. So, you know, th those are the three things, but all that really needs a proper set of of eyes from a great attorney to protect your interests if you're a seller. So let's switch over to buyer. Like what are the let's say the top two things someone really needs to ⁓ pay attention to from a legal standpoint if you're buying a practice or group. So you don't get in any pr you know avoid any problems later. So ⁓ I'm gonna give Like I'm gonna give two legal and one practical. Okay. So ⁓ in terms of legal, I would say one of the main areas is is from a buyer's point of view, what do you want the business to look like post closing? Do you expect that seller to stay on and work for you? ⁓ work for this new combined supported practice for a number of years afterwards? If that's the case, we need to look at what type of employment agreement they're gonna have, what are the ⁓ termination pieces of it? ⁓ as well as ⁓ you know, if there's a non compete, like just making sure that we've got those pieces of the protection of this valuable asset that you've bought that we're protecting it as much as possible, not allowing a seller to turn around and set up shop next door and kind of suck all your suck all your patience away and you know, take away all the patient flow that you had like the day before, right? Before you bought it. Like non competes are are something that comes up, whether they're enforceable or not. any buyer's gonna ask for a non-compete Yes within a certain radius for a period of time. Right. A hundred percent. Because I mean it's like one of the most valuable pieces. I mean you gotta have the most, you know, skilled clinician, you know, technically proficient clinician. If they're not able to get patients in the door to see them, th they don't have r they they don't really have a business, right? They don't really have a viable business there. So having dentists that have the ability to to draw in patients, to keep them coming, to really engage with them, have assemble the staff around them to create that mechanism for that continued patient flow is is very, very critical. And so that's what having a non competition, a non compete provision will ⁓ protect in terms of that asset that's being bought. So that's the first thing I would say. ⁓ the sec second thing I would say would be So we talked about the non compete and then in addition to that, I would say it is the indemnification provisions as well, right? Because you want to make certain that ⁓ like that that's kind of like a two there's kind of two sides to that coin. On the one side, there's the representations and warranties that are being made by the seller. Are those things true and correct? Or have they watered them down so much that they that they don't really have to tell you the fact that ⁓ they had their license suspended ⁓ nine months ago and ⁓ and so as soon as you'd bring them on like on board to your payroll, you would instantly lose some of the best ⁓ some of the higher tier ⁓ insurance coverages that or you know, you know, payments that you could get because you've got a doctor that's had, you know, there's their their license suspended, right? For good reason. Right. So that would you know, those types of things to make certain that what you're buying, you really ⁓ that you're really getting exactly what you expect. ⁓ is very important. And then I think just that practical tip I was going to say really just deals with ⁓ making sure that you have planned out that transition period from using, you know, that selling ⁓ practice and you know it has its you know galaxy of NPIs ⁓ that are used for ⁓ being able to bill ⁓ third party payors. I mean, like unless you're a fee for service, you like you're not really gonna care about this particular point. But if you but if you are not one hundred percent fee for service, you'll gonna wanna make certain that you understand what types of ⁓ third party payors that have been enrolled in and whether or not ⁓ you'll be able to continue with the with whatever rates there are that that that seller had post closing. And if not, there might be a need to adjust how we structure the transaction to to allow you to maintain and keep any sort of kind of grandfathered rates. Okay. So I have another question for you. If if a if if someone if you knew you had a client that was getting ready to sell in the in the you know next 12 months, what would the number one bit of advice be that you would give them to maximize the sales value of their of their dental practice or group? If you only give them one bit of advice that would positively affect the sales price of their practice or group, what would it be? Assemble a good team of people of people in the industry that can help you. Like make sure that you've got ⁓ or broker, somebody that's in your side that has market intelligence. Matt, your organization has done a great job in terms of, you know, assembling that type of ⁓ information and being able to help. And that team would then include like a good attorney, right? It's almost like a wheel, right? Spokes in a wheel. You want to make sure you've got a good like a good advisor that's gonna help you. You're gonna want to make sure you've got good ⁓ attorney, ⁓ a good CPA accountant, right? And then ⁓ you know, if you ha make sure you have a good relationship with your current banker or lender. Because all those together, like that team together, is gonna be what's gonna help you propel you to getting the maximum value from your dental practice. Great advice. ⁓ I mean everyone knows that ⁓ you know I'm Co-owner in a sell-side dental brokerage firm. ⁓ But I always tell people, like, whether you work with dental pitch brokerage or you work with another broke sell side broker, you need to have a sell-side broker that's going to represent you as a seller. If you're a buyer, it's it's beneficial to have a buy-side broker, right? But ⁓ I tell people like, I think you know, I think you make a huge mistake and be can be leaving a tremendous amount of money on the table if you don't have a a a you know world class broker helping you with the with the transaction or sale of your dental practice. Because you know, the job of the buyer is to buy your practice or group at the lowest price possible. And you as a seller, you want to get the the the maximum value. So if you don't know Like if you don't really know what your EBITDA is and your financials are a mess and you don't put together you don't put together a really professional package to take your dental practice or group to market and you don't know what the multiples on EBITDA are that are being paid for your dental practice, you're gonna just have to hope that whoever's making those offers to buy your practice is is offering you a fair price or a good price. ⁓ so I'm a big believer in like It's like when you sell your house. If you're not able if you don't know what the comparable sales are of the price per square foot in your neighborhood, ⁓ which is available now through real estate, you can go online and look that stuff up. But if you're selling your dental practice, this is a private market and there's no place for you to go to find out like if I have five hundred thousand dollars of EBITDA in this particular city, what are what it what are the buyers paying for that that are paying fair market value, right? Is it five times EBITDA, six times, seven? There's no way to get that data. It's impossible to get that data unless you're working with a great broker that's done a lot of transactions and actually has that data and can tell you, hey, your practice is worth ten million dollars. Right? Because that you cannot find that data. So again, it's like I say the same thing. You want to have a great broker if you're buying or selling. You you need to have a great attorney if you're buying or selling. Or doing any type of legal transactions in the dental space. And you also really need a great CPA. And you know, there are CPAs that do specialize in business and and dental practices. So they they understand the levers you can pull. They understand it cost you know, cost segregation, depreciation, accelerated depreciation, 1031 exchanges. And if you're not working with some really great people in those three areas, you can just leave a lot of money on the table ⁓ and have some unforeseen headaches, you know, post closing. Yeah. ⁓ so I've I've so ⁓ go ahead. No, no, like I was gonna say was as well is that, you know, that, you know, an attorney can be great, but they have to have a team around them, right? So having ⁓ healthcare regulatory folks, having tax people, having ⁓ real estate attorneys that can help, you know, specialists that can help. Because there could be all sorts of issues that arise. You know, you can have labor and employment issues. Do you have more than fifty full time equivalent employees? Well then you're now subject to the Affordable Care Act and, you know, ⁓ potentially additional reporting requirements and things along those lines. So there there can be a lot there. So yeah, I just echo what you said. And Dykoma has such a a breadth of of expertise, no matter what type of ⁓ legal representation and advice. is needed by a buyer or seller. Dykoma has has expertise in all those areas. So you can work with one firm and cover all of all of your legal needs and and representation needs. So let's have a little bit of fun here. ⁓ obviously not going to name any names or anything super specific, but I'd love to know what is the like craziest thing you've seen while you were going through a a a a transaction of ⁓ you know the buying and selling of a of a dental officer, a dental group. Something where you were like, I just can't even believe that that's going on right now. ⁓ gosh, what could I talk about? So where to begin? I mean, there could be the ⁓ there could be the the one where you had a a a seller that was getting ready to sell his practice to one of my clients and ⁓ the wife was also a dentist and you couldn't tell if they were married or not, right? You'd ask the husband and they'd say they're not married. And then when you asked because and then and this matter because we're gonna buy the equity of the practice. And theoretically the wife used to own fifty percent of the practice. And well, if she was the wife still, it'd be a lot easier to get the the sale, the consents for the sale. And when I'd asked the attorney, the seller's attorney, he like, No, they're not I mean, yes, they are married. And the and the s and the husband was saying, Or and the doctor saying no, we're not married. And it was just like it it was like that was one thing and and and it was and when I was talking to my clients about it, they were just like, Well no, Eric, the dentist ⁓ the doctor's not married because we had dinner last night with him and his girlfriend. ⁓ boy. ⁓ my gosh. ⁓ So that's one. Well I bet that didn't end well. You know what? no, it didn't. At least not for the dentist. ⁓ my gosh. Paying half is very expensive. Fifty percent is very expensive. Yeah. Wow. ⁓ my gosh. Divorce. Right. So we had to have we had to go in time out. We had to go on the sidelines for a little bit while they work some things out meritily and then ⁓ we came back. We circled back around once things ⁓ settled out. Well like once the dust cli ⁓ settled. So that was a lot of dust on that one. Yes. Yeah. Yeah. Yeah. So that was one. And then ⁓ gosh. ⁓ what would be another good one that I could actually say on air? ⁓ you know, ⁓ okay, and so then like another one would be, and this also kind of ties into practical advice, ⁓ I usually recommend to my buying clients that if there's a seller that has more than one location and but they're only selling you one or or like not all of their locations, that can be a problem. So for example, another one of my clients ⁓ was going to affiliate with the doctor and the doctor had two locations, and one one location was further out, and so we were buying the one that was a little bit closer into the city center. And so bought it, went through went through everything, and the selling doctor was gonna work for my client for eighteen months, three, three years, something along those lines. Well About two or three months after ⁓ we closed and the and a large check was written to that seller, suddenly the seller became disabled, unfortunately, allegedly. And ⁓ couldn't work, couldn't couldn't perform you know dental services, you know, sounded horrible, right? It sounded like a big tragedy. Until my client started to get suspicious, hired a private investigator to follow that seller, found that seller number one, going to the other location. Putting in ten hours of work at that location. And we're saying that they they had developed a disability. Yes. Yeah. Yeah. Yeah. Crazy stuff. Yeah. When I was ⁓ when I was ⁓ doing home renovations in my twenties, I had a a business partner who was a friend of mine since childhood. And we would just it was just formulaic. We'd buy a two bedroom, one bath house, and at the time in the area in Atlanta, $20,000. It was in like a transitional neighborhood in Decatur, Georgia. And then it was only two bedroom, one bath. And it was the same formula new roof, new HVAC, put on a back deck, repaint, new lights, new plumbing fixtures, you know, new cabinets, new front door. And it it was always around twenty thousand bucks, right? So we'd buy it for twenty, put in twenty, same doors. It was just formulaic. They were always two bedroom, one bath, and we'd just buy the same stuff from Home Depot. ⁓ so you know. Between the house and the renovation, it was always forty grand, right? And we typically sell ⁓ for like eighty. Just had it down to a formula. ⁓ Well, ⁓ I was we we got my business partner at that time unfortunately like was drinking a lot and then you know partying way too much and I think he I think he was like gambling too. Well ⁓ a house came up and instead of it being twenty grand to renovate, it was like thirty. And you know, I remember asking him like what happened? He goes, ⁓ you know, just delays and you know, this and that and blah blah blah. And then another house, thirty. Another house thirty and I'm like, something's not adding up here, right? So ⁓ anyway, ⁓ I start going through the the r the r the invoices and I'm noticing that there's being two toilets shipped to this house and two front doors. And twice the amount of lights, right? And twice the amount of fans. So I drive down to the house and I'm meeting with the ⁓ the subcontractor, like the project management guy, and and I said, I'm like, I don't understand this. Like, why did why did you order two toilets when we need one? And why'd you order two kitchen sinks and blah, blah, blah? And he says, Well, no, no, no. ⁓ I'm not gonna say my ex business partner's name. Again, this was like in ⁓ I was in my mid twenties, but he said so and so, ⁓ He had all that delivered here, but half of it went to the other house you guys are renovating on, you know, Clover Street. And I'm like, I'm like, yeah, we're not I didn't say this, but I'm like, we're not renovating a a house on Clover Street. So I get the address, I drive over there and it's being fully renovated. Come to find out, ⁓ you know, my friend at the time and business partner, what he decided to do was double order everything. Everything, sheetrock, everything. charge it to the house we were doing together fifty fifty and just taking all the equipment ⁓ and and and construction materials to his house. So he'd buy the house for twenty. It didn't cost him twenty to renovate it, you know, because he was charging everything, including the labor, to our houses. And ⁓ you know, that was pretty that was a pretty ⁓ crazy story, ⁓ you know, on on the on the real estate side. But yeah, some interesting things can definitely ⁓ definitely unfold in that space. Yeah. ⁓ any other advice that you would give someone that let's say let's say you have a client that said, Look, I have one or two practices and I really want to grow it to ten and then sell it. Any type of like, you know, ⁓ just general business advice or business philosophical advice that you might share with that client? Yeah. Yes. ⁓ Matt, you know, like the thing is what What we've seen over the years is that, you know, a talented clinician can split their time between, you know, up to like maybe three, four locations, right? And actually be chair aside and, you know, make certain that the ⁓ that the quality of care remains consistently high and of a certain level and you know, you deal with ⁓ the patient experience, you can really kind of finally they can really finally craft that. But once you get past that level, right, ⁓ that number of locations. You then s you then have to like have a certain additional set of skills, right? You have to be able to start to manage people. Right. Not just and not just the staff that's in those, you know, four or five locations, but also associate doctors that you might not see their work every day, right? As soon as the the patient's walking out or something along those lines, or you'll be able to in like a review charts or things like that. Right. And so you then have to be able to start to become a have a good eye in terms of who you can hire. and how you can make certain that the people that you hire are actually walking the walk that you want that you're trying to ⁓ promote and exhibit in your business, right? And so that's kind of one of the major things, right? Is like really understanding that those hires, you like you don't want to just like, okay, I just need a body to help me feel like kind of slot in and just get them to cover some cover some hours and cover a portion of the schedule in location number seven. you really want to be very careful in whom in terms of who you bring on because that can lead to all sorts of kind of secondary and tertiary effects in terms of causing just like workplace drama, you know, dissatisfied patients, all those types of things that can really ⁓ slow down and gum up a dental like a well functioning, high functioning dental practice. Yeah. ⁓ you know, what my benefit my advice is ⁓ to someone that is going to build a a multi practice dental group that they intend to sell. My number one bit of advice is get out of the chair and stop being chair side and focus on being the CEO of your dental group. Because I will tell you, ⁓ and we'll we'll wrap up in one minute. The it's much easier to sell a dental practice if the owner is not producing any of the revenue. Because you can a buyer can just take it over and all and the production is going to stay the same and don't have to rely on on the on the selling dentist. Eric, I know you have to go. ⁓ thank you so much for being here. If you enjoyed today's video, we'd love to invite you to join the Dental Mentors Facebook group. The group is completely free, but it is private at invite only. The group is for practice owners, dentists, specialists, and dental CEOs. If that's you, we'd love to see you inside. 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