When the right conditions are present, merging two or more dental practices into one can be a win-win for all parties.
Dental practice mergers sometimes occur when a dentist in the early stage of their career joins together with a dentist who’s closer to retirement. The two can work together for several years, while the junior dentist gradually transitions toward full ownership and the senior dentist prepares to hand over the reins.
Or, a dental practice merger can be a more balanced union, in which two dentists in similar career stages choose to team up, creating a stronger practice than either one could achieve solo. In this scenario, both dentists benefit from professional collaboration and pooled resources.
A merger is a major undertaking that will transform multiple career paths. With the right strategy, a merger can be one of the best professional decisions that a dentist will make in their lifetime.
If you’re considering a dental practice merger, Duckett Ladd’s team of CPAs and advisors can help. To help get you started, here are a few of the key pieces of advice to consider while you approach this major decision.
Set Clear Objectives for the Merger
In the early stages of exploring a merger, make sure that both parties are truly seeking a merger and not an acquisition.
An acquisition occurs when one practice purchases and absorbs another. The two parties in the transaction are a buyer and a seller. Mergers, on the other hand, typically involve two or more practices joining together to form a brand-new entity.
In a sense, a merger requires the existing practices to be discontinued so that the new practice can be formed. This is a trying process, and one that can only proceed smoothly if all parties are able to practice clear and thoughtful communication.
As you discuss a potential merger, identify what you hope to gain and what outcomes you feel the merger should be oriented toward. Your goals might include increasing your patient base, changing locations, or expanding services.
If both parties share compatible goals, then the merger planning process can proceed to a due diligence phase.
Perform Due Diligence on the Other Practice
If the two practice owners find enough common ground to justify moving forward, then it’s time to begin a due diligence process. This involves researching the other practice in order to determine whether or not it’s a good fit for a merger with your own practice.
Learn whether or not the other practice is sufficiently similar to your own in key areas, such as:
- Patient care philosophies
- Patient care standards
- Operational protocols
- Workplace norms
- Growth goals
Additionally, review the other practice’s financial statements. Look for any potential red flags such as ongoing lawsuit payments, large outstanding debts, or tax penalties.
The due diligence process should be proceeding similarly on both sides. Make sure that you’re as helpful and transparent as possible in providing the other practice owner with all of the information that they need about your practice.
Create an Action Plan for the Merger
If both sides complete their due diligence and agree that a merger is desired, then it’s time to create an action plan that outlines the path forward.
Your action plan should include a timeline that details when each step of the merger process should take place. The plan should also describe how expenses will be divided and how each practice’s existing staff will receive training in order to join the new entity formed by the merger.
Another consideration to work out in your action plan is the naming of the new practice. It’s often best to use an entirely new name that both merger parties are comfortable with. Once the new practice’s name has been chosen, you can work out branding details such as logos and marketing slogans.
Get More Help for Your Merger from the #1 Team of Dental CPAs
A successful dental practice merger requires careful preparation.
Both parties must communicate clear objectives from day one, perform due diligence in order to determine compatibility, and create a detailed action plan that will produce desired outcomes for everyone involved. When these steps are thoughtfully and collaboratively completed, a merger may bring about a positive transformation for all stakeholders.
If you need assistance planning and executing your dental practice merger or acquisition, the team of dental CPAs and advisors at Duckett Ladd can help. To learn more, contact Duckett Ladd today.
