Caber Hill is pleased to announce that it advised a large, multi-office endodontic group in its sale to Endo1 Partners. While the seller remains confidential, we are permitted to disclose that the seller is the largest endodontic group practice in its state and one of the largest in the country.
Going forward, the shareholders of the undisclosed seller are retaining a significant equity stake in Endo1 Partners. Moreover, according to our research, we believe this was the largest add-on acquisition of an endodontic group ever completed.
The deal closed in early June of 2021. Additional terms of the transaction were not disclosed.
Caber Hill is pleased to announce that Managing Director Maria G. Melone advised in the acquisition of three dental practices in New England by an undisclosed buyer. Owned by Dr. Gene Kim in the state of Maine, the three practices were:
The deal closed on April 29, 2021.
“It was a real pleasure to help Dr. Gene Kim transition to the next phase of his career,” Maria said after the deal.
Maria steered the deal through several obstacles unique to 2021, like lost revenue from shutdowns, compliance from PPP loans, and other factors that just weren't on the table a few years ago. In this environment, guidance from experienced investment bankers like Maria and our team of talented advisors at Caber Hill has never been more critical.
It’s often a shock to most business owners when I tell them that paying the least amount of taxes possible might not always be in their best interest. And that shock is understandable. For many owners, they’ve spent years carefully managing their accounting practices to reduce their tax liability. But when it comes time to prepare their business for sale, those same years-old accounting practices might not be in their best interests. The relationship between tax strategy and the value of a business may not be intuitive, but is certainly worth exploring in more depth.
First, let’s discuss value. The vast majority of a business owner’s time should be focused on growing both your business and your personal income—and the two are usually directly related. Therefore, many owners find ways to reduce "on paper" business income by treating personal expenses as business expenses to lower tax bills. To this end, most business owners write off everything they possibly can. However, the final years before selling a business call for a change in strategy—because declaring as much income as possible can increase the price received in a sale. Let me explain.
The latter part of 2020 saw a pick up in M&A activity, as sales volume began to return to normal, pre-pandemic levels, following a pause of many planned sales in response to uncertainty posed by COVID-19 shutdowns. In the last two quarters, Caber Hill Advisors has been working with businesses across multiple industries as sellers are looking to take advantage of current market conditions. Below are highlights from a few featured deals:
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Caber Hill Advisors very own Maria G. Melone was invited to speak on a panel to discuss the drivers and direction of consolidation in the dental industry at this year’s ADSO conference, a virtual event with a theme of “Boldy Evolving Dentistry.” A managing director on the firm’s healthcare team, Maria joined Caber Hill in early 2021, and was quick to share her expertise and viewpoint with over 100 attendees on March 24 (which was also her birthday!). Joining Maria on the panel were two other industry pros in M&A: Katie Douglas, a shareholder at Fredrikson & Byron; and Greg Wappett, a director of corporate development at 42 North Dental. Below, we summed up a few takeaways from their conversation.
1. More Deals Involve More Doctor Participation
In many recent deal structures, there’s been a focus to put in place programs that allow for doctor representation in the ownership of the business. In past years, most consolidation deals left owner dentists with no equity, or with a small minority position. But now, there’s more recognition to the importance of having the dentist fully aligned with the larger organization. Some of these programs include joint-venture opportunities and ownership models that go deeper to the doctor base.
2. Sellers Shouldn’t Expect an All-Cash Deal
As recently as February of 2020, many sellers expected to receive an all-cash deal for their sale. But with the challenges and uncertainty the pandemic has presented, there are few all-cash deals to be had. Now, buyers deploy other tools that might still give practices the valuations they held in 2019, but with some safeguards to the risk and uncertainty still present in the market. Some of these tools include deferred payouts, equity packages, and earnouts.
The decision to sell a business is a major event. For many business owners, they’ve spent years building a professional legacy that has value that extends well beyond dollars and cents. And yet, as big of a milestone, as significant of an event a sale is in the lives of owners, many don’t treat it as such. Rather than seek the expert guidance they would for other major decisions, a sale is often treated like another task on a typical to-do list—something owners can handle themselves.
This kind of thinking can be risky, with repercussions that can sour a seller’s exit plan. Here, I break down some of the common misconceptions that surround proprietary deals, giving a gentle (though much needed) reality check to the go-it-alone mentality too many owners cling to when considering selling their business.
What Is a Proprietary Deal?
First things first: let’s align on what I mean when I talk about proprietary deals. A proprietary deal involves a seller and buyer negotiating directly with each other. Communication is on a one-to-one basis, and—most crucially—without the presence of other competitive buyers or an investment banker advising the seller.
Perception vs Reality in a Proprietary Deal
There are a few common assumptions many owners make when contemplating selling their business themselves. If this were a shorter article, I could boil all these misconceptions into a single one: proprietary deals are simpler.
And that thought makes some sense on the surface. If two people can get into a room and hash out a sale, isn’t that better—and simpler—than having to involve teams of advisors? In a perfect world, sure. But the reality is that very few sales involve this idealized one-to-one negotiation. On the seller side, even a small independent owner-operator will consult with an accountant, lawyer, wealth advisor, family, friends, neighbors, and probably even the first-baseman on their neighborhood softball team. On the buyer side, most groups actively seeking acquisitions are large, sophisticated organizations. These firms employ teams of experienced, expert analysts and investment bankers who compile reams of financial workbooks, models, and valuations going into every deal. What this creates is an information asymmetry, a reality that totally shatters the illusion of that idyllic one-to-one negotiation.
So hopefully I’ve put to rest the assumption that a proprietary deal can be simple. Now let’s talk through a few more common misconceptions many small-business owners make about proprietary deals:
“I’ll save money.”
Caber Hill Advisors earned a special distinction on this year's Inc. 5000 list. With a three-year revenue growth of 465%, Caber Hill was the fastest-growing private financial services company in the Midwest. The team's performance was also strong enough to notch the 19th overall spot on the second annual Inc. 5000 Regionals: Midwest list.
The ranking puts Caber Hill Advisors in the upper tier of an impressive class of companies. On average, the Midwest honorees grew their revenues by 199% between 2017–2019. In that last year of accounting, this regional list of 250 companies employed 43,000 employees across 12 states, from Ohio to North Dakota. Collectively, they added $11 billion to the U.S. economy with high performance in a diverse set of industries that range from healthcare, tech, retail, energy, education, professional services, and more.
“It’s an honor to be recognized as the 19th fastest-growing company in the Midwest,” says Craig Castelli, CEO of Caber Hill Advisors. “We have a small but dedicated team and it’s a testament to them—and our loyal clients who believe in them—that we achieved this feat.”
Each year, the Inc. 5000 list celebrates the most successful companies within the American economy’s most dynamic segment—its independent small businesses. Past honoree have included brands that are now household names, like Zappos, Under Armour, Microsoft, Patagonia, and Oracle.
“This list proves the power of companies in Midwest states no matter the industry,” says Inc. editor-in-chief Scott Omelianuk. “The impressive revenues and growth rates prove the insight and diligence of CEOs and that these businesses are here to stay.”