Associate or corporate? Exploring the options of selling your practice

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Christopher Rocchio, DVM, founder and managing director of Monarch Business Consulting, LLC explained to attendees at the Fetch dvm360 conference in Atlantic City, New Jersey the pros and cons of selling to associate and corporate partnerships.¹ Above all, though, Rocchio said, “Our main goal through Monarch and me being a veterinarian is to keep veterinary practices in veterinarians’ hands. If we don't control our own profession, somebody else is going to control it. The more we can promote practice ownership, the better we're going to be able to control our own destiny.” Monarch can help sellers plan and successfully execute the sale of all or part of the practice. The company can manage a transformation of a practice from one set of owners to the next.²

Associate partnerships

Rocchio stated that in most associate partnership sales, “you're selling a minority interest in your vet practice somewhere between 20 to 40%...You're not trying to maximize the value of this sale in the beginning. You're really trying to get your associates to become an owner. Maybe get a long term plan for your practice and help with a little bit the employee retention as well as the growth of your practice.”

From there, a plan should be put in place in a few years to reevaluate the value of the practice and have the buying associate pay the rest of the 60-80%. This helps establish the exit strategy for the seller and have a clear path to retirement once the practice is officially sold off.

Advantages

• Flexible transition plan. Since you are selling directly to an associate, you can better discuss and negotiate how the sale transition will play out. Sellers can control when exactly they want to leave the practice in the amount of time that is right for them. Often times in corporate sales, there is a fixed transition in their contract of 5-7 years.
• Private buyer. According to Rocchio, it is more and more difficult to find private buyers in the veterinary profession, so this can be an advantage with associate partnerships. Private buyers can save you time, allow the seller more control in the sale, and more easily negotiate price.
• Retain employees. Selling to an associate can often improve employee loyalty. In contrast, if sold to a corporation, oftentimes employees leave the practice because of opposing views with the corporation’s policies.
• Encourage practice ownership. Selling to an associate guarantees that a practice is staying in “veterinary hands.” Veterinarians who have not had the opportunity to become owners, or veterinarians who want to grow their ownership skills can have the option to do so with an associate partnership.

Corporate partnerships

Different from associate partnerships where only a minority is sold up front, with corporate partnerships, a majority is sold, usually anything over 51%, but Rocchio stated that is typically between 51 to 80% up front.

Rocchio stated that there are a growing number of corporate buyers, so there are a lot to choose from when selling. He said, “These corporations are backed by private equity or high net worth individuals. At Monarch, we investigate all of these corporations to find out where their money comes from.”

Advantages

• Corporate recruiting. Corporations have more resources to recruit employees with their designated team. They are able to attend conferences and schools to recruit potential employees.
• More profitable. Since a corporation can increase the growth of a practice, there is the opportunity for a more profitable sale.
• Less responsibility. Less control during the sale can also mean less responsibility. Corporate partners will take care of most of the ownership responsibility during the transition period and handle all of the human resources requirements, recruiting, practice growth, and more.
• Good investment. Because it is more profitable, less responsibility, and low risk, corporate partnerships can be a good investment for the individual.

References

1. Rocchio C. Selling Your Veterinary Practice: Corporate and Associate Partnerships. Presented at: Fetch dvm360 conference; Atlantic City, New Jersey; October 9-11, 2023.
2. Why choose us. Monarch Business Consulting, LLC. Accessed October 10, 2023. https://www.monarchbusinessconsulting.com/why-choose-us