Selling a veterinary practice without a broker is undesirable because the seller will not be able to benefit from the value-add an advisor can provide (see Part 1). But a seller will need to find an advisor, not just any broker, to realize all of these benefits. Engage the wrong party and you will almost certainly over-pay for the service.
So how should a veterinary practice owner pick an advisor? (Hint: just because someone has sold their own practice, or been a doctor of veterinary medicine does not mean he or she will be a good advisor).
My sense is that a lot of veterinarians get recommendations from colleagues, or trade shows, or simply go with “someone they know.” This is one way to go about it, but it is not systematic, and very different from how large Companies and private equity firms find advisors.
Private equity firms and other large corporates develop relationships over time with brokers (investment bankers), lawyers, accountants and other high touch service providers.
When the time comes to sell a portfolio Company, private equity firms will contact a few investment bankers. Each banker is given an identical summary information package on the company. The banker are asked to review the information and present their views on how the portfolio company can be sold. On the basis of these presentations, and what they have learned by interacting with the bankers previously, the private equity firm will hire the banker they believe can get them the best results.
Veterinary practice sellers would be well advised to consider a similar track when hiring an advisor to sell a practice. In the months or years leading up to a practice sale, spend time getting to know potential financial experts. When a sale is imminent, give multiple parties the same background on the practice and ask each to give a presentation on how they would sell the practice, who might buy it, and what the deal structure might be. Investment bankers call these presentations “bake-offs” or “beauty contests”. Any reputable broker should be willing to put together such a presentation.
One caveat about this presentation, however. Do not read too much into any valuation provided for free. You can ask the party to create an expected sale valuation, but make sure you recognize that that valuation is an opinion. You should never use that indicated sale valuation to select your financial advisor.