Seller Success Stories

How Praxis Sold A Key Man Veterinary Practice In A Marginal Area For 120% Of Revenue

businessman looking a big key, solution concept.jpegThis solely owned and operated small animal veterinary practice had been established by the seller almost 40 years ago. The seller had opened his veterinary practice in a middle-income area that was now changing into a low-income area. A failed sales attempt with another veterinary practice brokerage firm had shown that decreasing demographics made the sale of the real estate impossible and the sale of the practice more difficult.

The seller wanted to immediately relocate to another section of the country after the sale. This move would limit the seller’s time available to help the eventual buyer with the transition process. This was particularly important as the seller was something of a superstar. The veterinary practice collected over $1,300,000 a year with the seller as the sole practitioner. The seller performed particular surgical procedures and clients would drive up to 30 minutes to seek out his services. We have a superstar veterinarian in a marginal location who is solely producing over $1,300,000.

Praxis targeted corporate buyers who did not intend to work in the veterinary practice and were more interested in steady practice revenue than area demographics. Praxis knew that corporate buyers would view the seller as a key man risk and advised the seller to be willing to remain with the practice for a minimum of two years. A seller of a practice with multiple veterinarians might be allowed to relocate after as little as six months when selling to a corporate buyer, but not a solo practitioner. Praxis also strongly recommended that the seller immediately hire an associate veterinarian. An associate was needed to ensure complete coverage, distribute the knowledge, and to allow the seller to cut back his hours. Praxis focused on buyers who were interested in leasing the building rather than buying.

Praxis attracted 4 offers ranging from $1.5M-$1.6M. The seller received 95% of the $1.6M sales price at closing. The sales price was approximately 120% of revenue and the entire process was completed in less than 4 months. Praxis worked with the seller to make sure that the allocation of the sales price left him with as much of the sales proceeds as possible after paying taxes. Praxis secured a 10-year triple net lease for $72,000 per year amounting to an additional $720,000 in rental income over the lease term. Although the buyer wanted the seller to stay on with the practice for 3 years after the sale, Praxis negotiated a 2-year employment agreement with a favorable work schedule due to the recent hiring of a new associate.