So you think you can merge
Dr. Felsted is a CPA as well as a veterinarian and has spent the last 15 years working as a financial and operational consultant to veterinary practices and the animal health industry. She also spent three years with the National Commission on Veterinary Economic Issues as CEO. She has written an extensive number of articles for a wide range of veterinary publications and speaks regularly at national and international veterinary meetings. She is the current treasurer of VetPartners, a member of the Veterinary Economics Editorial Advisory Board, a member of the CVPM board of directors and the current treasurer of the CATalyst Council. In 2011, she was awarded the Western Veterinary Conference Practice Management Continuing Educator of the Year and in 2014, the VetPartners Distinguished Life Member Award.Dr. Felsted enjoys exotic international travel, and when the dvm360 team last heard from her, she was headed to the Galapagos.
An overview of the costs, the benefits and the basics involved in joining forces with another veterinary practice (including a checklist of key issues that need to be considered for the best shot at success)
DTeibe Photography/Shutterstock.comMerging one veterinary practice with another is one of those ideas that sounds swell in theory but is really hard to do. Nevertheless, if you can identify the right partner, it's an idea worth considering.
What counts as a “merger”?
In this article, I'm defining a merger as two or more practices combining into one legal entity; not one practice “merging” with a large corporate conglomerate-that last situation is more accurately described as an “acquisition” by the larger entity.
There are many merger models. Often, two veterinary hospitals combine and practice together under one roof. Other times, practices combine into a single legal entity but continue to operate out of their original locations. Owners of the individual practices can share equal ownership of the combined entity, or they can have varying percentages of ownership.
The ups and downs of merging
Mergers can create economies of scale with regards to facilities, equipment, inventory and staffing. They can expand services available at different locations and improve medical and surgical expertise-more heads are better than one. Merged practices can also benefit from shared management responsibilities and improved practice revenue and profits. They can even improve doctor and team quality of life (somebody to cover the shifts!) and provide a potential exit strategy.
Of course, there are downsides.
One of the hardest aspects of a merger for many veterinarians is the loss of autonomy. Instead of being the sole decider on every decision, each owning doctor has to function as part of a partnership. Furthermore, putting a merger together takes time and money and often involves difficult logistical decisions. Will one veterinarian need to give up his or her facility? Will staff be let go? And if the owners end up being unable to get along, breaking the merger can be painful, time-consuming and costly.
The first step in pursuing a merger is to identify the right practice partner, which is no small task. Finding a suitable business partner can be as difficult as finding a life partner.
The merged entity needs owners who can respect each other's differing views and choices and be OK with the fact that they won't always get their way. It's also critical that merging practices have a shared vision for the future. For example, if one partner wants the merger to jumpstart a veterinary empire and the other is just looking for an easier way to cruise into retirement, the partnership may not work.
For a more detailed look at all of the points worth pondering when pursuing a merger, download this printable merger checklist.
Even when future visions are aligned, there will always be day-to-day differences of opinion about how to do things. Like spouses or life partners, business partners need a way to resolve differences respectfully and to find solutions everyone can live with when they don't agree.
If the practices plan to operate under the same roof-or clients will be routinely visiting multiple locations-the practices also need to share a similar medical philosophy and offer comparable fees and client service experiences. A client who has been totally happy with less-than-gold-standard care (and the costs that go with it) won't fit in at a newly merged practice that emphasizes much more comprehensive (and expensive) care. And clients accustomed to friendly, slow-paced visits with doctors and staff they've known forever won't be happy in a fast-paced environment with a bunch of people they don't know.
My parting advice? Get yourself professional guidance as you work through the process. A good consultant can help you identify the key issues that need to be addressed both in identifying a good partner and dealing with the nuts and bolts. A veterinary CPA can help you with valuation and tax issues, and an attorney can structure the transaction properly and make sure you have an orderly way to break up if that (unfortunately) happens.
Dr. Felsted is the founder and president of PantheraT Veterinary Management Consulting and is a member of the Veterinary Economics' Editorial Advisory Board.