Racing Techniques Create Higher Practice Values

Drafting or slipstreaming is an aerodynamic technique where two moving objects are aligning in a close group to exploit the lead object’s slipstream.
https://en.wikipedia.org/wiki/Drafting_(aerodynamics)

When LPS has a larger client in a region that will command a dozen or more eager bidders at very high values, other LPS clients in the area can often get a significant value increase.

The smaller clients in some cases achieve the same high value multiple of EBITDA as the larger client if partnering with the same IDSO.

We have engineered multiple IDSO partnerships where an LPS client valued at 7x EBITDA has achieved 10x values due to other LPS clients. The smaller client gets a boost in value by drafting in the wake of the larger client! This occurs in specialty and in GP.

While common in Dental Trifectas (pedo, ortho, OMS) created by LPS, it is also applied to all other practice types. A bidder interested in entering a new region will “pay up” for size. When LPS can provide an IDSO with multiple great clients in the same area, it often creates new bidders which would not have considered entering the region without the number of clients LPS can assemble for them. Size begets more and higher bids.

Bigger is better and smaller practices can benefit from LPS size and the size of other LPS clients. This is in part how LPS achieves higher values than the little advisors and doctors attempting to complete IDSO partnerships without LPS.

Size matters!

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Chip Fichtner

Principal at Large Practice Sales

Chip Fichtner has built, bought and sold multiple companies, both public and private, in a variety of industries for 40+ years. He has been featured in numerous media outlets including The Wall Street Journal, Forbes and CNBC. His tolerant wife of 30+ years allows him to live on Southwest Airlines visiting clients every week.

Racing Techniques Create Higher Practice Values

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