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The 2020 Actual Transaction Results & The 2021 Forecast!

Chip Fichtner
on Jun 2, 2020 5:45:24 PM

 

Several large LPS transactions will by design push into early 2021, but it was still a $300,000,000+ year for Large Practice Sales vs. “only” $200,000,000 in 2019. COVID be damned! Newer IDSOs stepped up and filled the void of the larger, legacy IDSOs who spent time and energy on their existing practices during the shut-down and stopped most buying activity. With structure modifications for COVID, doctors in 2020 transactions will achieve 2019 bubble level values, and more over time. There is a trick in the earn out structures…

GP: Less action as the GPs were slower to snap back than specialists post shut down. The ADA says 68% of independent U.S. GP practices were not back to 2019 collections levels for the first half of November vs. 48% of the DSO affiliated practices.

ENDO: Survived COVID shutdowns better than all other practice types. They are HOT. Eight ENDO only buyers are feverishly bidding against each other with fresh capital. But the multi-specialty buyers are still the high bidders. We achieved world record values for LPS ENDO clients in CA, PA and GA.

PEDO: We perfected the Trifecta strategy of selling pedo, ortho and OMFS client practices in the same area, at the same time, to the same buyer, at crazy values. (Call or email for the Trifecta memo). We got a few pedos values of 10X+ EBITDA, about 65% more than they would have been worth alone. I predict this will be a BIG part of our business in 2021.

ORTHO: Trifectas created record values of over 4X collections for multiple, exceptional ortho practices. With five new ortho only groups bidding, even without a Trifecta, we sold multiple practices at over 2X collections, including a large one in California last week at 2.6X collections. Multiple bidders' pays’ off, again.

OMFS: Like ENDO and ORTHO there are now at least five new OMFS only IDSOs. They are bidding nationally, and in some cases getting outbid by the large multi-specialty buyers. Trifectas are achieving the highest initial values for OMFS practices. The OMFS groups are the beneficiaries of the captive referrals from the pedos and the orthos in a Trifecta. There is big money to be made in the earn outs if structured correctly. Long term equity values in Trifecta focused DSOs will be highest we believe, which is why young doctors do IDSO transactions

PERIO: This is often a challenging specialty, but we are still seeing interest from the multi-specialty buyers in certain geographies. We sold a 68-year-old perio last month at what will end up being 3X+ collections. We are helping multiple investor groups evaluate forming PERIO only IDSOs to achieve higher values for our clients, just as we pioneered the Trifectas. 

The big stories of 2021 will be big DSOs recapitalizing and buying smaller DSOs and of course, your TAXES. Taxes matter and your federal, state and local taxes are all going up. Nobody knows how much, but rich dentists have a target on their chest with the new administration.

Topics: Post By Topic Dental Practice Transitions (16) Inv, Transaction Results

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