Buying or selling a practice is one of the most significant financial events in a dentist’s career – with only one chance to get it right.
EMA is Now ADS MidAmerica Dental Practice Sales
EMA Dental Practice Sales has changed our name to ADS MidAmerica Dental Practice Sales – in recognition of our longstanding relationship as an independent affiliate of ADS Dental Practice Transitions. We’re proud of our relationship with this group – whose members have worked with over 38,400 dentists and managed more than $2.8 billion in practice transitions. Our name is the only thing that’s changing. We look forward to working with you!
In related news, we’re pleased to be the MDA’s (Missouri Dental Association’s) Endorsed Broker in western Missouri. We share this honor with our colleague in St. Louis, Mr. Guy Jaffe of ADS Midwest, who will be serving the eastern half of the state. We are excited to receive this endorsement and look forward to being of service to MDA member dentists in their transition planning, practice valuation and sales.
Reflections on the Associate Covenant
[Note: A condensed version of this discussion will appear in Dental Economics magazine later this Spring.]
“I’ve interviewed potential associates that don’t want to sign a restrictive covenant when they start. I guess I can understand their concerns, but I want to protect my practice. What’s the solution?”
While this seems like a difficult problem with mutually opposing solutions, the fact is that like most problems, the other party’s needs and fears can be dealt with by a little understanding and flexibility. On this issue, each party has legitimate concerns that must be addressed in order to successfully and productively go forward.
Let’s take a look at the host doctor or Employer’s position first. There are two legitimate reasons the host needs a restrictive covenant agreement with their employees; the first being the most obvious concern that the associate might leave the practice, take patients and staff and do measurable harm to the practice. We have all heard stories to this effect and certainly the host does not want to become another anecdote. Often too, they cannot afford the loss of business and revenue. The second, and perhaps less obvious risk is the loss of value to their practice. Should they have in their employ an associate who does not have a covenant not to compete, (for the purpose of this discussion, a covenant not to compete and a restrictive covenant will be considered one in the same) in place, this poses a threat to any potential buyer in diminished revenue and subsequent value of the practice. Buyers assume enough risk as it is and don’t take kindly to having no control over the associate doctor and what they might do after the sale. The uncertainty will cost the host doctor dearly, perhaps even undoing the sale. Clearly, the host doctor needs an agreement in place.
The associate doctor has another set of problems. While not always the case, the associate is likely to be a recent graduate, just getting started in their career. They cannot afford to drastically limit their future by signing large and long covenant agreements on their first day of employment. I will leave to another discussion what time and distance is acceptable or even enforceable in your state. Just suffice it to say that their motives for not signing an initial covenant agreement are much more about their needs than any designs about destroying the host practice.
So what is the solution? Let’s assume that with the above knowledge about each other’s position that a little common sense will prevail. Obviously the associate doctor cannot sign effective their first day of employment. Likewise, the host doctor has every reason to protect their practice and practice value. An initial honeymoon period of 90 days (maybe 180 in some cases?) should pass before the terms become effective. If the host feels that the new doctor could steal their practice away in less time than this, they may have greater problems than this agreement will solve. In fairness, the associate should not expect to be able to work indefinitely without promising their employer this protection. Frankly, if this problem proves to be difficult to maneuver around, one would wonder how this will ultimately end. My guess is, not good.
Steve Wolff, DDS
UMKC Class of ‘77
Recently at ADS MidAmerica. . .
Sale #249 We were please to represent Dr. Chris Merriweather in the sale of his Leawood, Kansas practice to Dr. Jason Ciminieri. Our congratulations and best wishes to both.