What happens after the sale

Alex from the Rock / stock.adobe.com

Congratulations! After years of hard work, you are about to realize the equity from your veterinary hospital after recently selling the business. Your beloved veterinary hospital grew into a multimillion-dollar business serving the community of pets and their owners for many years. The success of your business came from a love of the profession, great client service, growth in medical services, innovation, long hours, and hard-earned business acumen. This allowed you as a veterinary practice owner to attract the attention of veterinary consolidators. After months of research, haggling, and sleepless nights, you mutually agree upon a valuation, and the sale is imminent. You breathe a sigh of relief and plan your retirement.

Although this is a momentous occasion, you made sure to examine all aspects of selling your beloved veterinary practice. You consulted with your tax adviser on the best model, the optimum time of year, and other potential consequences. You may have chosen a total cash sale, cash and equity, or a partial sale to maintain some operational control; what happens after the sale may vary according to the buyer. You are satisfied with the process and set the closing date. The countdown begins.

Selling your veterinary practice while continuing to work there is analogous to selling your home while continuing to live there. The new owners move in, but you don’t move out. The process after the sale can be a relief, but it can also prove emotionally and physically exhausting.

It is at this stage that the full reality of no longer owning the business may cause traumatic feelings. The selling veterinarians will often experience the stages of grief as they turn their “child” over to new guardians. After the sale, a veterinary corporation typically requires the selling veterinarian to continue working in the practice and participate in a transition period to maintain stability. If a selling DVM leaves abruptly, there may be an exodus of staff and clients that would be devastating to the new owners.

You now move into the next phase of selling: onboarding and integration into the new veterinary group. At this point, the date and time for the closing are set. Until that day, you and other hospital leaders will have potentially increased contact with veterinary group management. You may expect multiple calls and emails daily. The practice manager will be called upon to provide vendor account information, utilities, and local service contacts. Human resources will need all staff names, dates of birth, tenure information, and accrued vacation time to set up payroll for day 1.

Sellers do not often let their hospital team know that they are selling until a week or even 24 hours before the sale. They may be concerned about staff leaving or associate veterinarians resigning when told their employer is changing, especially when their new employer is a veterinary corporation. You should give your team the appropriate time to process this change because their information will be provided to the new company. You may do this in a group setting or in one-on-one meetings to give each employee a chance to ask questions. Be prepared for the angst and trepidation they will experience. Moving your team to this “new normal” may be complex and requires emotional intelligence, empathy, and courage.

While preparing for the integration process, ask to speak to former owners who sold to this group to learn about their experiences. Ask open-ended questions such as:

• How did the integration process go when the hospital team was onboarded?
• Was the hospital assigned an integration concierge?
• How was the closing day handled? What was done well, and what could have been done better?
• For the first few days and weeks of integration, were all your questions and concerns answered in a timely manner? Was it easy to contact someone for help?
• Was there a flurry of activity in the hospital for a period of time?
• Did the process interrupt the normal flow of business? Was the team flooded with calls from numerous departments? Did people from the home office show up unexpectedly?
• When was the final inventory performed? (This is usually done within 24 hours of closing. If your team is not familiar with regular inventory accounting, you should plan it well.)
• Was the onboarding for human resources and payroll processes done in person or electronically? Who trained the team on the new processes?
• How were employee work hours logged after the sale? For example, did they use time clocks or practice management software?
• Were there any unexpected changes in agreements made since the sale? (These would include both “handshake” and written agreements.)
• Was there a vested interest in keeping your team “whole”? Or were wholesale changes made immediately after the sale?
• What would you change about the process from initial contact to negotiation to the closing date to integration?
• Were you satisfied with the transaction and outcome?
• And most importantly, would you sell to this group again?

Along with the sellers to which you are directed, call upon others informally. Keep in mind, just as with any reference, you may be led only to those who will speak in positive terms. There is no taboo about selling to a consolidator anymore, so asking your colleagues about their experiences with this group is critical. You should also ask to speak to the integration team or manager. Hopefully, you have been assigned a concierge team with a point person to which you can pose the following questions:

• Who can meet with the team to answer their questions before the sale? They will want to know about benefits, whether schedules will change, and whether reporting will change (who is their “boss” now?). Doctors will have concerns about drug supply, their schedules, their contracts, etc. These questions must be answered thoughtfully, honestly, and completely.
• How are banking changes handled? A crucial transition must occur for all deposits at the time of sale. Even if this happens in the middle of the day, the credit card machines must be changed to send all revenue into a new bank account at that time. If the seller continues to receive funds in their bank account, these funds will need to be transferred, which can create headaches.
• What is the process for bank deposits post sale? Is the practice manager required to make deposits with a certain frequency? How is this audited?
• Who will handle the change in accounts? Vendor accounts under the seller must be closed and new accounts opened for the time of sale so that the new owner is immediately billed for all orders and invoices. This applies to external reference laboratory services, utilities, payroll, maintenance services, etc.
• If branding is to occur, when and how will the name change and notice of new owners become public? When will new signage be erected and the website changed?
• Will staff receive new uniforms immediately?
• When is staff eligible for benefits, and what is the enrollment process?
• What is the expectation for interaction with the corporate home office and regional managers?
• What polices and processes will change? Is there a team member handbook for human resources processes?
• How are financial benchmarks, goals, and budgets set?

Many veterinary groups have formed special onboarding/integration teams that shepherd newly purchased hospitals through this process. An onboarding team should consist of a veterinarian as well as a non-DVM manager, and both should be change management experts.¹ Many groups still struggle with this process because of lack of staff, knowledge, experience, skill, and, most significantly, emotional intelligence. A clearly defined written process should be shared with the seller prior to closing. Planning is 1 of the 6 strategies for coping with change,² and hundreds of tasks must be done during closing and integration. Well-managed veterinary groups have an intentionally organized integration process to set a positive tone for the working relationship going forward. Otherwise, poorly executed onboarding may cause frustration, anger, regret, spiteful behavior, dissent, and attrition. A superbly performed process will help the staff be inquisitive, open, insightful, and helpful. Integrating this process from the start will help everyone be less anxious of other impending changes.³

Although most sellers continue to work, they may step back from their leadership role and decrease their work hours shortly after the sale. However, during the integration phase, staff should know you are fully involved with them. They should know you are confident in your decision to sell, and they should see how it will benefit them. This is a complicated process that is both transactional and emotionally charged. Senses are heightened and hackles will be up, and staff may feel left out and blindsided by the change.

The integration process is especially significant when the new owner is a veterinary aggregator. The negative connotation associated with veterinary aggregators requires an overabundance of caution and care after closing. As the seller, being there for your team during this time is important; however, the veterinary group must provide a scrupulous and conscientious approach to integration. The life of the practice depends on it.

References

1. The ultimate guide to post merger (M&A) integration process. DealRoom. Updated June 8, 2022. Accessed June 2, 2022. https://dealroom.net/faq/post-merger-and-acquisition-m-a-integration-process
2. Wisdom K. 6 strategies for coping with change. Henry Ford Health. May 24, 2017. Accessed June 2, 2022. https://www.henryford.com/blog/2017/05/coping-with-change
3. Trevisani E. 4 tips for a successful merger integration. Business Talent Group. Accessed June 2, 2022. https://resources.businesstalentgroup.com/btg-blog/4-tips-successful-merger-integration