Economy altering dynamics of practice sales
NATIONAL REPORT — The business of buying and selling veterinary practices continued into early 2009 at a steady pace, with some brokers even reporting sales increases — but it's clear that market dynamics are changing, and not always in positive ways.
That's the word from lenders, brokers, consultants and others with a hand on the market's pulse.
The slumping economy appears to be motivating some practitioners to postpone selling. Other factors influencing the overall dynamic include age demographics, basic supply and demand and selective purchases by national chains, the experts tell DVM Newsmagazine."What I notice — and what others I talk to in the industry are seeing — is that there are many potential buyers, people who want to own a (veterinary) practice and are qualified. What we don't see is enough inventory," says Gavin Shea, director of the sales group for Matsco Companies Inc., a Wells Fargo-owned firm based in Emeryville, Calif., that finances veterinary, dental and optometric practices. "In other words, there's demand, but not (enough) supply."
With the Baby Boom generation of veterinarians at or near retirement age, it might seem like there should be plenty of inventory. Why not?
"My sense is that those who might want to retire are reasoning that, if they cash out now in this economy, where would they put their money? So they're working longer, hesitating to sell," Shea says. "I'm not saying that's the right philosophy, but it's likely how some doctors reason."
Matsco's veterinary-practice sales were mostly flat from the fourth quarter of 2008 until now, and 2008 sales were down from 2007, Shea says. The company's online Marketplace resource, http://www.matsco.com/marketplace/, which offers a tutorial for listing practices and financing purchases, currently shows about 300 practices for sale.
Rather than encourage buyers to compromise on what they're looking for, Shea says his firm urges them to wait until the right property comes along. "We help them identify the right practice, and if that's not available right now we try to keep them focused on looking and not settling for something else."
"Finding quality practices (to sell) has always been a challenge," agrees Dick Goebel, DVM, who directs the Great Lakes Division of the Simmons & Associates practice brokerage firm, based in Monticello, Ind. "It's not difficult to get listings, but it is challenging to find high-quality listings."
Still, Goebel says Simmons handled 73 practice-sale transactions during 2008, up nearly 20 percent from the 61 it handled the year before. In his own Great Lakes region, which includes some economically depressed areas like Detroit, Goebel says his business since Christmas has been better than the entire final quarter of last year.
As more Baby Boomer practitioners do finally decide to retire, "we'll begin to see a greater volume of quality practices for sale," Goebel believes. "In the current conditions some (practitioners) are deciding to stand pat, perhaps work a few more years. We saw a similar situation in previous recessions and right after 9/11."
That agrees with what practice consultant Christopher J. Allen, DVM, JD, observes in his area, near Binghampton, N.Y. "Truthfully, we haven't seen one (practice) sell in some time — at least one we were involved with. I do know a couple of people who are trying to sell. My sense is that everyone is kind of hunkering down, working the practice they own and trying to keep up the gross so they can sell when the economy improves," Allen says.