Peter Hughes – 50 percent ownership scheme

1. We won’t be advising Synstrat clients to participate in the scheme.

2. The feeding frenzy of dental corporates has almost certainly passed its zenith.  Those who came late to the party will, in our opinion, struggle to get to critical mass.

3. The risk of a scheme such as this not getting to critical mass is;
(a) Very high and
(b) Imposes additional risks which we believe are unacceptable for dentists.

4. The scheme as outlined in the communication with dentists is essentially a paper shuffling exercise on the basis that the promoter believes that by herding a sufficiently large number of dental practices, the herd in total can be sold for a better profit multiple than can individual practices; IF the promoter can attract critical mass which is going to prove to be very challenging.
 The risk of being one of only a few practices which sign up is that the promoter won’t have the corporate scale to administer a proper business plan
 Nor will it have the leverage to get the type of multiple suggested in the recent communication to dentists.
Dentists caught in this situation with half of their practice owned by a mini corporate and signed up to administration/management agreement are going to be in the awkward position of not being able to sell the other half of their practice to anybody not approved by the minor corporate but unable to achieve the kind of multiple outlined in the initial approach to dentists.

5. But as the vast majority of dental practice owners will gain more by owning their own practices until about three years from actual retirement, if properly advised, this leaves only those dentists with good sized practices which haven’t sold out to Dental Corporation, 1300 Smiles, Pacific Smiles, Ekera etc and are nearing retirement as potential candidates less those who have promised a dentist employed in their practice that they will sell to them.

Finding good practices for sale which meet all of the above criteria and which are prepared to take the significant risk of becoming stranded in a corporate which is too small to achieve its aim is going to prove to be a daunting task.

What should dentists do?
Most dentists in receipt of the communication from Peter Hughes should drop it in the bin. 

Even if a dentist is interested in a proposal why would any dentist be among the first to sign up and risk being stranded in a dental corporate no mans land?  It doesn’t make sense.

Most dentists would make a decision to wait and see whether Peter Hughes signs up a sufficiently large number of practices, to make a stock market listing as a reasonably significant sized company by market capitalisation first, before they commit to such a scheme.

If this means that the scheme doesn’t get off the ground so be it.  Dentists are in the business of providing dental treatment not assisting paper shufflers to make large sums of money by playing pass the parcel.

We at Synstrat take the opportunity of wishing Dentists throughout Australia of a very enjoyable Christmas and New Year.

Graham Middleton