Dental Practice Owners: Questions to Ask Before you Pursue an M&A Transaction
A guide to ensuring your transaction decisions are best for your business.
Are you a dental practice looking to acquire a company? Or looking to sell your business? Are you trying to determine if it’s the right time to make a change? There are a few important questions you should ask yourself before you start the process.
M&A transactions can be complex and involve significant amounts of money and risk. Knowing the answers to the questions below can help to ensure a successful transaction and can help in avoiding potential pitfalls. While this is not a comprehensive list of all considerations for pursuing a transaction, these questions can help you build a strong foundation for any deal you pursue.
For Dental Practices Looking to Acquire a Company
- Why are you acquiring this company?
- What are you looking to achieve from the transaction? Have you clearly defined success and how you will measure it?
- Does your strategy for the transaction align with your overall corporate strategy?
- What are the potential risks and benefits of the transaction?
- Have you been realistic about your ability to do the transaction regarding access to resources?
- What are the tax implications of the transaction?
- Tax implications can have a significant impact on an M&A transaction. It is essential to understand the tax implications of the transaction before entering into it. What are the potential tax liabilities for both parties? Are there any potential tax benefits that could be realized?
- What is the reputation of the company you’d like to acquire?
- Have you completed diligence related to:
- Synergies – Deal value drivers
- People – Compensation strategy, culture
- Technology – IT systems, 3rd-party solutions
- Finances – Quality of Earnings (QOE) analyses
- Operations – SG&A, supply chain
- Regulatory Compliance
- Do the results of your due diligence investigations match the information you were provided?
- Are there any outstanding issues with the company that you need to be aware of?
- If there are outstanding issues, what steps has the company taken to address them?
- Do you have a level of success defined- what is the minimum level & optimal level of integrating at each level? Are they aligned with your practice strategy and goals?
- Have you defined the target operating model for the combined company (e.g., degree of integration)? Are you prepared to provide your integration teams with a roadmap to facilitate integration planning? Or
- Do you understand the concerns that your stakeholders (other owners, bankers, CPAs, attorneys etc.) may have about the transaction? Have you developed a communications and retention strategy to address your stakeholder concerns?
- What will it take to integrate the acquisition into your practice’s culture? Are the cultures aligned, and are they a good fit?
- Are your technology systems compatible? What support will be needed to integrate the technology systems, and what is the timeline for doing so?
For Dental Practices Looking to Sell a Company
- What are the motivations for pursuing an M&A transaction?
- Do you have a clear sense of your company’s value?
- Is the potential buyer the right fit?
- What is the expected impact on shareholders, employees and patients?
- How will the transaction impact the practice’s reputation: positively or negatively?
- When and how will the deal be announced both internally and externally?
- Is your organization prepared to undergo a robust due diligence process encompassing legal, financial, operational and compliance concerns?
- Who can management tap to support the due diligence process?
- How resilient are processes and systems throughout your organization? Is any infrastructure single-person-dependent?
- Have you completed a sell-side quality of earnings report?
- Have you had an independent party due diligence on your company? If so, have you proactively addressed the issues they identified?
- Has the transaction perimeter or “what’s in and what’s out” been defined? Which key employees, patients and assets will be part of the transaction?
- What are your criteria for a buyer? Would you prefer a strategic or corporate buyer?
- Are there any strategic, revenue-enhancing and cost-reduction initiatives that have been identified or are already in process that could increase the company’s valuation at the exit? What is the status of those initiatives? Should you continue in-process initiatives?
- If you are divesting a business that will need to be carved out, how entangled is the business with the rest of your operations? Have you developed carve-out financials and defined the standalone costs for the company? Have you determined what transition services you are willing to provide the buyer? What will it take to operationally carve out the business by transaction close?
- What will it take to integrate with the buyer’s operations?
Ultimately, it is crucial to understand the answers to these questions before pursuing an M&A transaction. Knowing the answers can help to ensure a successful transaction and can help to avoid potential pitfalls. If you would like to discuss the sale or expansion of your dental practice, contact an Adams Brown advisor.