The Lexpert Special Editions profiles selected Lexpert-ranked lawyers whose focus is in Corporate, Infrastructure, Energy and Litigation law and relevant practices. It also includes feature articles on legal aspects of Canadian business issues.
Issue link: https://digital.carswellmedia.com/i/1470136
14 www.lexpert.ca Feature rollup isn't necessarily easy, says Dentons' Johnson. However, a rollup can be attractive to a professional such as a dentist or veter- inarian if the "deal is structured properly, and the right incentives are provided." Nick Pasquino with Borden Ladner Gervais LLP in Toronto says selling to a consolidator can be more attractive when a health care professional starts to think of a succession plan for retiring. "ere are a lot of practitioners in the Boomer generation who are looking to exit," Pasquino says, noting that a large consoli- dator might make a better offer in cash than a younger practitioner who might have to pay in installments over time. "ey may still want to be involved in the business, but not to the extent they had before, and this gives them a gradual way out." Elliott Greenstone, a partner at Davies Ward Phillips and Vineberg, also points out that "it's a different generation we're dealing with today," with many health care professionals coming out of a professional school, oen with large amounts of debt. "Many are saying they don't want to build their own practice and are happy working within a structure that allows them to do what they do best without the headaches of running a business." Consolidators such as private equity also oen have expertise in centralizing back-office functions in a rollup. is centralization can create economies of scale that can make the merged entity more profitable while providing the same, or an even better, level of service. "Private equity is particularly good at this," says Cheryl Reicin at Torys LLP, who leads the firm's life sciences prac- tice. "e whole trick is to get the volume and to minimize the costs while continuing to provide high-quality, custom- izable services at lower costs." Another complicating factor is dealing with the various regulatory issues that vary from province to prov- ince. For example, in Ontario, a dentist needs to own the actual practice and cannot share professional patient fees with anyone who is not a dentist or a member of the dental college. However, this type of challenge can be overcome, says Newell. "In the dental world, what we're seeing is the development of dental service organizations that provide a turnkey solution for dentists to operate within, and the dentists would have ownership of the professional practice with the professional goodwill." Such an agreement between the manage- ment corporation and the professional prac- tice gives the former financial control over the practice by paying a management fee based on revenue or a flat fee. Public policy and regulatory issues oen arise related to the protection and enforce- ment of goodwill associated with the clinics because the practice is responsible for providing the health services. erefore, services or other agreements between the parties will usually provide restrictive cove- nants and termination provisions. In other circumstances, a licence may be considered personal to the holder, and a new licence application will be required if the entity holding the licence is subject to change. Depending on the type of licence and the relationships between the parties, parties can sometimes rely upon a transition service agreement to allow them to continue operations under an existing licence while a new licence application is pending. Cusinato at Bennett Jones says that different circumstances may call for other solutions, and the regulatory colleges "oen have really good solutions" when approached by consolidators about how to invest in these businesses while protecting public policy interests. Lawyers in this practice area helping with health care consolidation say that given the regulatory complexity and the differences in how provinces oversee these professions, having a legal team on either end of the deal that understands the nuances of M&A in this sector is vital. "ere's a lot of lawyers who are familiar with mergers and acquisitions," says Hillel Rosen, Greenstone's colleague at Davies. "ere's a much smaller group who have expertise in this type of consolidation." Despite some recent setbacks in valua- tions due to geopolitical events like infla- tion and fears of an economic downturn, lawyers in this subset of M&A are bullish about its future. Says Rosen, "My sense is that we're right in the middle of this phenomenon and that ultimately it's full steam ahead." "PRIVATE EQUITY HAS BEEN INVOLVED IN A LOT OF THIS CONSOLIDATION BECAUSE THEY'VE GOT THE EXPERTISE TO TAKE WHAT I CALL 'OLDER' FACETS OF HEALTH CARE AND MODERNIZE THEM" Curtis Cusinato BENNETT JONES LLP SIGNIFICANT WHITESPACE OPPORTUNITY FOR EXPANSION Source: Dentalcorp 15,000 Practices in Canada 94% Independent Practices dentalcorp competitors 2-5 combined # of Locations and Market Share 500 3.3 % Market Share 400 2.7 % Market Share