Veterinary practice owners deserve a just reward for their hard work. However, getting a generous paycheck is not always enough. Having spent the past couple of decades growing a business, nurturing a team and fostering client relationships, practice owners are rightfully worried about what will happen with their legacy and whether a buyer will take good care of the employees.
Many successors promise to improve upon the previous owner’s achievements, but that likely won’t happen, as we repeatedly witness veterinary practices acquired and then resold at a higher price. Poorly handled cultural integration, broken promises, and a lack of proper onboarding and strategic approach to prevent burnout of the frontline staff can result in precious talent jumping ship after the business changes hands.
Fifty corporate groups are currently consolidating veterinary clinics in North America. Brakke Consulting predicts that veterinary practice consolidators will claim a quarter of the market and account for 50% of pet care within the next two years. The growing competition for acquisitions escalates prices, and today, consolidators can pay up to 18 times more than what a practice is worth. This trend plays into independent owners’ hands because they can afford to leverage the heightened corporate interests to their benefit and the benefit of their employees.
Here are 12 questions to ask potential acquirers to understand better what is likely to happen after you shake hands and sell your practice.
1. What is your investment horizon?
In other words, “Will you sell the practice to somebody else in a couple of years?” Most corporate groups leverage an arbitrage strategy that includes acquiring as many practices as possible within the shortest period and then selling them at a higher price within three to five years. That classic approach can work if you prioritize a quick exit as a seller. However, if your reason for selling is the desire to step down from operations and focus on practicing veterinary medicine, you might not want the clinic flipped so soon.
2. Who are your stakeholders?
This isn’t just about learning which private equity firm is backing the deal. The response will indicate whose interest the buyer is serving and what will drive business decisions. If the key stakeholders are investors, then the priority probably will be to generate a return on investment. If the key stakeholders are employees, then their well-being will come first.
3. How many veterinarians do you have on the leadership team?
This question will give you an idea of how operational decisions will be made and whether the executive team will have a veterinary voice to lobby for what’s best for patient care. This might be important if you want to keep your business in the hands of veterinarians and sustain high-quality medical standards.
4. What changes are you going to make?
Some buyers say they won’t change things, while others promise to take over marketing, human resources, accounting and IT. Some are planning fundamental transformations. Whatever the answer, discuss the plans with the potential buyer and decide what is right for you. If preserving your legacy is important, you probably won’t want too many changes. But if you would like your practice to continue growing without you at the helm, then partnering with an innovator might be just right.
5. How soon after the deal will you implement changes?
Even if you welcome progress, it can never be rushed. An acquisition is a huge immediate change, and it’s a sensitive time for staff members uncertain about the future. Make sure the new owner won’t implement changes sooner than people are ready for them. Discuss the stabilization phase and ask how the buyer plans to collect feedback from the team.
6. Do you require a non-compete?
Non-compete clauses in employment agreements are prevalent despite widespread criticism in the professional community. Consider if you want your employees to be deprived of the choice to leave if the new leadership fails as an employer.
7. What authority and duties will I have after the sale? How much autonomy will I have in decision making, and in what areas?
With most practice acquisitions, former owners are obligated to stay on as clinicians for some period. The trouble is that many owners are beyond burned out when they sell. If you are not up for another year of 60-hour workweeks, set expectations for your performance and discuss the work schedule.
8. What are your onboarding strategies and communication plan?
Selling a business is a tough decision. Marrying two businesses is even tougher. If you value your existing workplace culture and want to preserve it, inquire about the buyer’s plans to assimilate your employees into the new environment. Make sure you will be a part of the process and that your opinion will be considered.
9. What are you going to offer my employees?
The goal is to ensure that employees’ earnings and benefits don’t get cut — and preferably increased — and incentivize everyone. For example, some veterinary groups offer signing bonuses or a stake in the business to the employees. Also, inquire about the compensation model. If your veterinarians are salaried, switching to production-based compensation might be stressful.
10. How do you plan to protect employees’ mental well-being?
The leadership is responsible for creating an environment where employees feel safe and empowered. Ask the potential buyer whether it has a clear burnout-prevention strategy. The answer will give you an idea about whether the issue is understood and how the challenges would be addressed systematically.
11. How do you measure your success at delivering on commitments?
Most veterinary groups have a prepared answer to the previous question about employee well-being. However, inquiring about how the promise will be fulfilled can reveal what’s behind the “Putting people first” motto. After all, you can’t improve something that you don’t measure.
12. How would you describe your corporate culture? What are your core values?
Corporate culture is essentially how employees and management interact, behave and do business. Learning about the potential buyer’s decision-making, communication and leadership style can help you understand whether the pairing is a good match. For example, if decisions are passed down from top to bottom while you always encourage your employees to speak up and share their ideas, a red flag might be waving. Talking about core values and, more importantly, asking for examples of how they are practiced is also a good indicator of how comfortable you and your team will be in a new environment. Value mismatch is a tremendous burnout trigger.