Types of Buyers for Your Practice

As you head towards the end of your career, you might wonder what to do with your business. Will you close up shop? Will you sell it? To whom should you sell it?

If you’re looking for a buyer for your practice, there are two basic types of buyers in the market - strategic and financial buyers. They each have different goals, objectives, and reasons for buying your practice.

Strategic buyers. These are buyers looking for an acquisition that strengthens their market position, expands their capacity, grows the services they offer and potentially gains access to more patients and customers.

Typically, they are already operating in your industry. A strategic buyer might be a competitor, a supplier, or even a customer of yours. They are on the lookout for acquisitions that provide synergies. They look beyond your balance sheet, revenue streams, and other financial metrics. They will examine how your acquisition will benefit them, you, and the customers. They will place value on the infrastructure you have in place, your team and leadership, your processes, your contracts, and your reputation.

With strategic buyers, acquisition can take a long time. Many issues must be addressed, such as legal, accounting and tax issues, personnel and process considerations, and long-term planning. If you’re looking for a quick sale, a strategic buyer might not be your buyer. However, if you’re looking for someone who will carry on your mission, this type of buyer is probably the best fit.

Financial buyers. These buyers are more concerned with the numbers of your business. If the investment makes sense and meets their financial expectations, they will pursue an acquisition.

They have cash and are looking for a good place to make their cash work. This type of buyer is either a private equity firm, a group of investors, or just wealthy folks. They typically are focused on short-term gains. For example, they will purchase your business with the intent of operating and improving it, usually through cost-cutting measures, and then sell for a profit in 3 to 7 years. Unlike the strategic buyer, they might not be looking for synergies.

When they place a value on your practice, they will examine your financial reports, past performance, and some future projections. If they can earn their required return on investment, they will consider your business. They rely on your company’s past performance, EBITDA, and other valuation metrics.

If you’re looking for a speedy closing, these are more apt to meet your expectations. They typically want to close in 2 to 4 months.

If you’re looking to buy or sell your business, send me a note at www.davidnorrismdmba.com, and we can discuss the possibilities available to you.