The consolidation process underway in this industry presents unprecedented opportunities today to those practices that timely and intelligently participate. However, it may eventually pose a threat to those practices that fail to timely participate. Thus, waiting, even if only to plan and prepare, to participate in this consolidation is likely sub-optimal.
The best opportunities are available now. Private equity investment is fueling this consolidation. This, along with steadily declining interest rates, has led to record high valuations being paid for practices like yours - nearly twice the value available as recently as 6-8 years ago – which has encouraged practices to willingly “become consolidated.”
Timing the Consolidation Cycle
The first consolidators entered the market 6-8 years ago and started paying slightly higher multiples than historically existed. But only in recent years did additional consolidators enter the market, stoking increased competition that has driven valuation multiples up to today's levels. This is a great time to be an independent practice.
However, as the consolidators reach critical mass over the next couple of years, they are likely to feel less pressure to “pay up” to entice new practices to join, which will likely lead to lower attainable valuations for the remaining independent practices. Moreover, as consolidators become larger and more dominant, they may present more competition to practices that remain independent. Thus, in a few years, it may not be as great a time to remain an independent practice.
Timing Interest Rates
Separately, interest rates have only recently moved higher from their all-time lows. If interest rates go higher, as many expect, this will also place downward pressure on valuations.
Therefore, practice owners should timely determine how they want to participate in this consolidation in order to avoid the risk of losing significant enterprise value.
The Process Timetable
It takes time to do it right. Thus, even if you are not yet ready to begin a formal process, don't wait to start planning and preparing.
The typical timeline for the planning, preparation, evaluation and execution of a strategic transaction can take anywhere from 6-24 months, typically 8-12 months if a practice is already “firing on all cylinders.” Moreover, for owners considering retirement, it is worth noting that transactions structured to generate the greatest qualitative and quantitative value for the owner typically require the owner to continue managing and/or practicing for a period of 2-3 years after the merger closes.
Hiring an adviser at the beginning of your planning stage, even before you feel ready to actually pursue a strategic transaction, is optimal. Doing so typically creates greater value, reduces workload and entails relatively little, if any, incremental cost relative to waiting to hire an adviser until you are actually ready to pursue a transaction.
Cavanaugh Partners offers you dedication, experience and a track record of success unparalleled in the industry. Our clients typically conclude that retaining Cavanaugh Partners was the best decision they made, both strategically and financially.
We partner with you to deliver the ideal result, as you define it, with relatively little financial risk to you. Here's what we bring to the table:
- We have a proven track record of securing for our clients the highest practice valuations in this industry to date
- Typically, more than 80% of what we are ultimately paid is paid only if and when our client is successful
- By retaining us, our clients typically improve their outcome by 2x - 5x the total amount they pay us
- This means that our clients typically generate a return on the “fees at risk” they pay Cavanaugh Partners that ranges between 400% and 1,600%.
- We do the detailed analysis, crunch the numbers and manage negotiations, so you don't have to – after all, you still have a business to run
- While advocating strongly for your interests, we know both what the consolidators want and how to close a transaction on a timely basis
We also don't ask you to take our word for it. Our previous clients are happy to speak with potential clients of ours and, after we have had an opportunity to become acquainted, we can provide you with reputable, relevant references .
Notably, the initial reaction of many successful business people, including veterinarians, is “Why should I pay someone to help me, especially if I've already been shown attractive offers by interested suitors?” Hopefully, we have provided solid answers to that question but, in short, conducting a thorough, open process assures that the most attractive offer possible will reveal itself to you.
So, instead, we ask that you ask yourself two related questions. First, given how important your practice is to you, your family, your team and your legacy, is it really worth the risk of embarking on an entirely new type of transaction with financially sophisticated consolidators without a knowledgeable adviser on your side? Second, when hiring an adviser, why take the risk of hiring anyone except the best, the adviser with the strongest track record of success in your specific industry? After all, this is likely to be the crowning strategic transaction for the practice you so successfully built over most of your career. Why not do it right?
Analogies abound for the decision to hire an expert adviser, including summiting a high mountain peak with a knowledgeable Sherpa or, closer to home, finding the the right veterinary specialist for a pet with complicated medical needs. Perhaps, though, the most relevant analogy is that of the successful captain that has led both ship and crew around the globe over a long journey, enduring both the frightening storms that challenge any business and the beautiful calm seas that reward those that make it through those storms. As the ship finally approaches the harbor of the destination port, one never previously visited, the captain realizes that the expertise that successfully led this ship over thousands of miles of open seas is not going to help navigate the unfamiliar shoals and channels that plague the last few miles of this long journey. So, the captain wisely seeks out the most capable local harbor captain, the one that has successfully navigated so many other similar ships through this same harbor. Together, they complete the journey successfully, leaving the captain, ship and crew best prepared for their next journey. Having the right partner to help you successfully “finish the journey" in unfamiliar waters, is critically important, allowing you to leave nothing to chance when you have come so far already.
We seek to partner with those that know when to seek expert assistance, those that decide not to subject themselves to significant, yet avoidable, risks, especially when so much is at stake, those that want to discover and successfully pursue the best possible opportunity.
What's the winning strategy? Get the best guidance from the most experienced adviser. Maximize the likelihood of your desired outcome. Secure the greatest net value. Reduce the level of work burden and distraction any strategic transaction inevitably imposes on your and your team. In other words, don't go it alone. And, if you really want to win, choose Cavanaugh Partners.