Independence? Smiles Inc 60/40 split?

Smiles Inc is pushing a line about consolidation of independence in independent dental practices.  However they won’t be independent once they’ve sold the majority share of their practice.

Various corporates have promised that dentists will be left in charge of practices after sale to them so that they continue to run it in their own style as lead dentists.  However the actual experience is that many dentists have been disillusioned by their treatment by corporates subsequent to sale.

Once a dentist sells a controlling interest in their practice they will only be able to exert as much control as the majority owner allows them.

We see significant risk in selling a majority stake.

An actual experience (this was a vet practice not a dental practice and the people involved were not associated with the promoters of Smiles Inc.  However the lesson was salutary.

A couple of “veterinary consultants” approached a group of wealthy business people to bankroll them in a scheme involving the purchase of veterinary practices on the basis that they promoted themselves to those investors as being able to add significant profit and value to practices.  They then approached the owner of a veterinary practice known to me and purchased a majority equity position in that practice, having promised the owner that they would bring superior marketing skills to bear and significantly improve the turnover and profitability of the practice.  In due course they failed to do so.  When the wealthy investors demanded to know why that practice (and perhaps others) wasn’t performing, those who had engineered the deal told their backers that it was because the owner (now minority owner) was not performing whereupon he was summarily sacked.  When he protested he was offered a token sum for the remainder of his equity with the threat along the lines of “we have bigger and more powerful lawyers and if you fight us, our legal team will delay the process until your legal fees swallow up your home”, or words to that effect.

We are wary about dentists selling a majority stake in their practice as subsequently the relationship can be very one sided.  If buyers really must sell to a corporate, then we suggest that the sale be to a corporate who buys 100%.

However, our overall experience tells us that dentists other than those in their last few years of practice are invariably better off by continuing to own and run their practice.  There are significant benefits in doing so and some of those benefits are lost once a dentist becomes an employee of a corporate.

To date it is unclear as to how many practices have decided to accept Smiles Inc’s offer.  The fact that Smiles Inc is still banging its drums suggests that its uptake has been slower that it wished.

Best wishes to all dentists,

Graham Middleton