Grew 4 Dental Locations to 31then sold to PE - Vincent Cardillo CEO of Maeva Dental Advisors

cool. Welcome to the top M&A entrepreneurs. Today, my guest is Vincent or Cordillo. Uh, Vinn is the CEO of a company called Meva Dental Advisors. He has been doing dental acquisitions and vising since 1990s when he was in the 20s. Is that correct? Yeah, 1996 or so. Thanks, John. Appreciate it. Yeah, well, thanks very much for joining me. I gotta tell you, you and I uh uh reached out to you quite some time ago, and it took a little while to get you scheduled on this, so. I really, really appreciate that. So, you started Dyna, um, what was the first name of the company that you started? Yeah, so in the 90s, the first one was called Northeast Dental. So, I had started with one office and, and um that was a, a fresh start, which we call kind of a denovo, and then I purchased two and then I did another denovo and I Purchased one more and then and then did another Denovo, all of my twenties. All in your twenties. Now, how did those opportunities come to you? Were you looking for them or this just somebody just come to you and say, hey man, I don't like doing this, it's, I can't make it work, I can't make money. What, what did that look like? And How are you open to that opportunity in the 20s? Because some people don't see that until your 50s or 60s. Yeah. Yeah, so, so I, I mean, I had opened up a dental practice after getting my MBA with the dentist. So I did it with a dentist and we opened up the practice, and then, um, you know, we, our goal was to grow, we opened up another one and then there was a company that was private equity backed that um failed and they went bankrupt. So they had these practices that were still going, but they had to divest of them. So, you know, we looked at them and did our diligence and, and we're able to, to buy them at a very You know, uh, advantageous price. I mean, cheaper than it would cost us to build it from scratch. So they had a, uh, so the private equity company went bankrupt, and there's these dental practices in there that were looking for a home, and they were trying to unload them. Who did you buy those from, uh, the bank and receivership or the private equity? um, through the management team that was still there. The management team from the organization was still there, and they were, they were divesting. Yeah. How did you, what kind of deal stack was that? Was that, hey, take us over, or we're looking for 10 million, or what did that look like? Yeah, I mean, obviously they wanted a whole lot more, but at the end of the day, um, you know, the offer was You know, if I'm thinking about it correctly, probably. 30 cents on what what they were looking for. Yeah. And, you know, they said no and walked away. And then they came back a couple months later, and then they said yes, the 20 cents. Could couldn't find any other buyers. It came back to you, yeah. Did you have to raise any money to purchase that? or was it, you know, I had, I had raised some local angel investor money um prior to that, so I had some cash in the tillers, plus I had some, uh some bank. Uh, lines if you would. So this was in your business plan from MDA grow and acquire fast and then sell to a PE firm. Right, right, but I ended up selling to a larger Dell group. This is my first one. That's your first one. So the, the next one was was dental Dynamic Dental Partners. Right, yeah, so that was. Uh, we started that in 2011 with with two dentist partners that I had known for years, and they had already done the same thing. They had a group. And they sold to a large player right around the same time I did, different ones. They're fast forward 5 years, their non-competes were up. They wanted to get back in the business, and I, I wasn't doing anything at the time, so I said, yeah, well, let's do this. So I moved to Florida in January 11. We started with 3 offices, and in 2 months we had 31. Yeah, and that's uh Alex Gianni, right? Your, your partner and you were CEO. And founder of that. What, what did that partnership look like as far as the cap table? I mean, it's fifty-fifty or what it was it just kind of minority interest, yeah. So, so I was the COO, so I, I basically managed and rolled up the operations for that then to be sellable if you would, um, and, you know, our partnerships, me and the two docs and another guy, we were pretty much even partners. And in it, and then as we brought on these other practices, this was coming out of the, you know, the last recession, if you would. So there was a lot of practices in mass, I mean, in Florida and in Arizona that had, um, you know, made a large investment in their practice, and, you know, there was a big downturn and they couldn't handle it. So we started doing a lot of uh management agreements that turned into acquisitions that said, hey, look, we're managing you, but we've got the right to potentially buy you in the future. And then we also brought in other people um towards the end that had a few practices to roll them all in. Interesting. So you were just at that point you go let's go as fast as possible to find. Was it distressed, financially distressed, not business wise distressed? I mean, you're in Arizona. I'm in Arizona, by the way. I, I'm, I'm in the Tucson, Arizona, not the, the Phoenix area, yeah. So I mean, look, the these are good practices that just had too much debt. So they, they just need to have a Uh, you know, restructure their, their, their debt table really the cap table on, on however we wanted to manage it. So we were able to do that, um, and in an orderly fashion where we were able to bring these practices together, show that they could be positive results, um, partnering with us. And uh we pulled it off. Yeah, and you were number 14 on the 500 list that year. Yeah, I saw that. It's pretty amazing. Um, you, when you, uh, renegotiate that debt, recapitalized, did you start, when did you start the relationship with Huron Capital, um, After, so we, we had, we already had to have deals completed or deals in an LOI or some type of commitment. Um, so we could present them with, you know, the whole deck, the whole model, the whole presentation, saying, hey, look, here's the practices we acquired, you know, practice number 128 months ago, here's what it did. We practiced, acquired practice number 2, and, you know, 3 months later, here's its success, you know, practice 45, and 6 on month 4, and here's, you know, the, the, the story, right? So we had to have a good story around, um, you know, what we're doing. It's just not slapping together saying. You know, here you go. Yeah, yeah. Yeah, I'm going back to that kind of taking on too much debt. You had to get some more debt, renegotiated it to a lower, you know, monthly price. Um, what kind of company took that on? Was it a bank or was an institutional investor, or? Yeah, so, so in the end, how it came down, we had a number of practices that we owned outright, maybe. I don't know, 7 of them or 8 of them. Then we had management agreements with another 10 or 12, that was basically like, look, here we're managing, however, you know, if we have an event. In the future, you're committing to sell at this multiple. Right? And then we had at the end. Uh, a partner that had like 10 locations that was gonna come in. So we basically, we didn't, we didn't really have to get much that except for the 6 or 7 or 8 that we owned, we were packaging this all together. OK, so some kind of uh agreement between those just to Uh, you know, right. Future we, we had a management contract saying, hey, look, we're gonna, we're doing your back office, we're doing all your accounting, we're doing ops for you. So we were, we brought in our back house for a fee, right? And that allowed us to show the success and to bring all the financials under one umbrella. Operations on the one umbrella and actually back then, we actually converted those practices to a, to a centralized dental practice management software, so the data could be centralized. Yeah. And we had all that lined up, even though we didn't own all those practices, they were on their agreement in a management agreement with an option to buy them. That's basically what we did. Yeah. So if you only own one dental practice right now, what and and I'm sure you advise a lot of people on this, it's, it's a what multiple sales or EA or Ebida. And then what's that look like? 125? Yeah, I mean. It's the, I mean, for one practice it's 3 to 53 to 5. And you're, and what's the threshold to start moving up that EEA to where a PE firm's very attracted to it. So PEs are looking at 3 million of Ibida. 3 million. OK, yeah, yeah. So, and at that point in today's market, I mean, back then 3 million of even it was 7X, today it's 10. Yeah. So, I mean, there's, you know, but you have to have a system in place, right? You have to show that you've been successful putting those together. So if you're a GP practice that does a million dollars, typically the Ibadan has 20%. So if you do the math, you need 15 practices. Yeah, yeah. Right, doing a million bucks to be able to get the, you know, so how do you get to the 15 is really the journey. Now for the dentists, you know, the banks, banks like giving money to dentists, so. It's cash. I mean, it's, yeah. Yeah, I mean, because, because dental offices typically don't fail. Right, you know, what fails is, you know, does the dentist have the team around them to help them scale? You're right. And, and that's what Mava does today. We help a lot of these um group practices scale by utilizing a fractionalized C-suite. Yeah, how do you move that person that's just uh working in the business, the EI, and then move on, say, You know, this, here's all what you're doing today, and here's your schedule. Guess what? Next week you're doing this, which is completely different, it's above the business. Yeah, so yeah, I mean, what we found is is data doesn't lie, right? So we're able to start pulling data, you know, either out of their system for what's happening operationally in the practice, you know, through QuickBooks and say, hey, look, you know what, your margins are pretty strong, um, you know, one, your, your, your payer mix is strong, you, you're running good good practice, you're, you're in there alone, you wanna grow. Let's get an associate in here. Right, now, let's see if you could train that associate. To provide the quality of care that you do, um, at the, at the speed that you do, let's say, or or the efficiency that you do. And you, you know, dentistry is a people business, right? You need to make patients happy and you've got a lot of employees that you have to grow. So it's constantly growing people. The systems are easy, so then we help them put together, hey, look, this is your type of dental practice, your business model. These are your top 89, 10 KPIs that we need to follow. They should be within this range. If they're in this range, just keep the ball rolling. And your job, and you know what those KPIs are. This is funny because I, when I uh worked on a marketplace. The KPIs for a marketplace are completely different the KPIs from a, you know, a, an e-commerce store. I mean, there might be a tiny little overlap, but it's completely different. Knowing what rings the bell, you can fix it. Exactly, and I mean even in dental, like if you're an orthodontic practice versus a general dentist, I mean the KPIs are not even similar. I mean, you got new patients ones, but they're very, very different. Do you see most people when you reach out to them, uh, they're ready to say, hey, I, I wanna grow faster, make more money, like some kind of life changing exit, or Are they happy working with people to people business? Yeah, you know, a lot of them, a lot of them are, are happy doing what they're doing. You know, a lot of them don't even know that this is going on, right? Um, however, it's becoming more and more prevalent. Look, there's 200. Institutionally backed dental companies right now. 200, yeah, I saw the number on the uh they're they're mandated, they're mandated to buy and partner. So, you know, it's moving pretty quick. We're working on a, we're working on a DPO now, which is a dental partnership organization in the Northeast of Orthodontist, Pedoonists, and oral surgeons. Because there's a symbiotic relationship amongst the three they refer to each other. So we're looking, we're looking to roll that out. Um, we're looking to get our founders on board, which is about 2.5 to 3 million of IITA by the end of the year, and which is, you know, probably 12 practices or so, and we're looking to scale over the next 5 years to 80 locations. Did you say 80 or 8? 80. And do you take, how much a piece of it as an advisor do you take of that? Well, so on this particular one, I, you know, I'm gonna be an investor and the CEO of it. Oh, OK, right, so Ma will act as a third party to provide some services where Uh, needed if, if we can't get it elsewhere for a better price. So we'll, we'll utilize Mava for fractionalization in the beginning, until we can just start hiring our own people internally. Gotcha. And then you bundle it up and you're already I, I mean, you've got 200 now private equity groups seeking what you're putting in front of them. Yes, exactly. So, you know, we think that this particular model that we're going after, we have some, we have the ability to to grow at that scale in the Northeast market where we're looking to focus. Yeah. How long do you stay with them, how long did you back to the uh dynamic dental partner? How long did you stay with Huron? Yeah, so interestingly enough, I didn't, I stayed 6 months, but everyone knew that beforehand, cause I had recently got married and my wife was in Massachusetts, that's where I'm from, and I was living in Florida, and she was coming down there for 2 weeks, and then we would go away 2 weeks. It just wasn't working. And so, you know, shortly thereafter I, I had left them. Yeah. Did you do when the private equity buys, did they purchase 100% of it, or was it 67 and they ask you to roll over another 20-30 to continue working on more acquisitions, cause I, I looked on Huron's portfolio and they acquired more and more, changed the name to Pure. Yeah, I think they're up to like 70 locations now or so. Yeah, 75. That's amazing. That's like they've gone through a number of iterations, um, but they've had it for a while. So, you know, in this particular model, you know, I, I would in theory be on for a while, if I wanted to, right? Yeah. What do you do right now to market yourself to get in front of these dental DPOs to say, you know, Vin is the guy we need to talk to if you want to do this. Yeah, I don't do that great a job of it as a product. No, I, you know what, before I used to Because I'm an, I was traditionally an operator and in the weeds all day, it's tough to do it. So then after I came out, you know, I helped some people put on these DSO conferences, and I was speaking, so I was more out and about speaking, so people would ask me, you know. So now after COVID, I really haven't been on the circuit. And, um, but, but it's fine because I'm really Focused on creating our own. You know, DSO DPO at the moment. And are you doing more or less traveling that you used to do? Yeah, so I'm doing more traveling in this market, visiting doctors and all, right? So we're, so we're, we've got a biz dev team that I'm working with. To, to try and, you know, drum up these opportunities. So we've got like a pipeline of 2025 deals right now. Obviously. So the business team is out there making phone calls, making meetings, and they qualify them and then you get in front of them with some kind of presentation, right? Yeah. How long does that presentation last? I mean, does it blow their mind or they, they get it? Yeah, by the time, by the time they're on the call with me, they, they kind of get it. A lot of them understand what's happening and, you know, there's all different reasons. Some are like tired of it. They want to get out of the chair, and we can potentially create a path. Others really get it and say, hey, look at, you know what, if I can join on with the right partner, um, in, in, in 10 years, I can have that support and I can keep growing practices, uh, it's, I'm gonna be better off than trying to do it on my own. Now, a lot of people don't understand that. Like, I didn't understand it when I was younger either. But these opportunities didn't exist when I was younger. Like, we were, we were on the forefront back then. We didn't have a lot of opportunities for the new types of models. The new types of models, like I said, DPL dental partnership. So we really partner with you and we're kind of Um, The private equity firm or that actually knows dental for them. Right, so it's kind of like a DSO within a DSO. Oh, you're, are you, you said you were an investor when you say partner. Are you actually investing capital or is it? Yeah, I'm actually investing, but obviously a lot less than the private equity. I mean, yeah. Gonna be pretty substantial, but what happens is, so let's say you got 3 practices, and you're like, then, you know, I'm just getting it going here. I got 3 practices. You know, I wanna keep growing, and we'll put out a model that says, OK, look, we're gonna come in and purchase 60%, you're gonna roll 40 in. and now, look, we're gonna, we're gonna give you all the cash you need to grow, and not just the cash, we're gonna give you all the support. To allow you to grow, so you don't have to go through all the trials and tribulations that I had to, you know, 2 or 3 times. Yeah. And that 60% when they sold out, that's their money though, and you still put up other cash to help like working capital or marketing, right? Exactly. OK, yeah. And are you looking for a specific Or you have targets like obviously what you're doing here is wash rents, repeat, and then you've gotten so good at it, you go, you know exactly what to look for. How do you continually find the people to fill in these roles that where somebody wants out of the chair? Yeah, so, well, out of the chair is a journey, right? So it's a path that they, the doctors have to graduate from. And the graduating is, is the ability for them to mentor other docs to do what they did. If they can do that, they can get out of the chair. If they can't mentor another doc, then they're gonna get stuck. Yeah. And usually, usually when that uh when they're ready to make that transition, does the business already have the cash flow to support the next dock up or there's plenty of space in there? Yeah. Oh yeah. Yeah. Interesting. And, and you also bring organic type growth ideas that you've seen through these what, nearly 100 probably different dental practices that you've worked with. Yeah, I mean, look, you've got It's like a 123 project right out of the gate, it's, it's working with them on a budget, and you know, working with them on tracking metrics, you know, we'll get a good bounce on year one just doing that. Right, what kind of 20%, 30%? Yeah, like 12, 12%? OK. You know, that's, that's, that's the average that that I've seen. The good ones are, are higher, right? The, the ones that embrace the relationship, the others that don't, but that's more on the, you know, those folks probably wouldn't become part of the group, but on On my history with consulting side, folks, once, you know, they might hire you, but they may not want to listen to what you're saying and there's not gonna be a job. And they don't do it, right? They, they, they don't do it. They spend money with you, but they don't execute on what you tell them to do. Yeah. Right, right. Yeah. You know, so then we go into marketing, right? And now we're starting to lift new patients, right? Once we get the new patients, now we can start lifting provider hours, right? In, in, you know, practice hours. You know, some of them are working 3 days a week because that's all they want to work. And they got business for more so, and they haven't really wanted to look for another doctor, so now we do it for them and it's not a problem. So you're maximizing cash flow before you grow. Yeah, excuse me, say that again maximizing cash flow, yeah, yeah, right. I mean, a lot of these practices are not, you know, full, fully utilized, right? They might be at 70% utilization or 60% utilization. And when you, when somebody says, he goes like, I don't wanna do that, you, you're still gonna figure out how to get 100%, even if it's not from them. Yeah, I mean we're gonna work with them, right? We're gonna, you know, we're not gonna just jam it in there and say, look, we're doing it anyways. Yeah, cause most of the practices that we're partnering with, you know, they have good margins, so they know what they're doing. Right. So, again, this is not a turnaround type situation. These are what we're doing for us to scale at the speed that I'm suggesting we would from 0 to 80 in 5 years, we can't do that with turnaround deals. We need good practices. Yeah, yeah, a profitable practice. Do you take it? Practices that are say, I'm break even or I'm losing money. Do you fix those? No, you don't like them? Yeah, oh no, we fix them, but not in this particular model. Right, right, right. I, I, I, you know, on the, the consulting side of business, that's what we do, right? Yeah. Now, is it your, is this fund that you invest or purchase the businesses, is that from the proceeds of selling out to Huron and other stuff, or are you, do you have a fund where you're raising capital from other accredited investors? Yeah, yeah, no, so right now we are going to we're we're in market in two areas. One, you know, bringing our founders together, and two, Where I'm in the midst of speaking to institutional investors at the moment that want to fund the deal. Yeah, right, because it's You know, it's 70 million or so that's got to be funded between debt and equity over the course of 5 years. Interesting, yeah. How much debt and equity, what's the split when you purchase a company? Yeah, I mean, it's all on what the doctor's gonna roll and how, how big you are, how big your Ibida is because then you can leverage, you know, the, the bank, um, multiple of leverage higher. Right, so yeah, exactly. So, I mean, out of the gate, it's, it's more e when you're starting from ground up like we are out of the gate, it's more equity until you get to the 3 million of EIA, and then you can get. You know, better debt. Yeah, right, maybe, you know, at 4x. So typically you're seeing um Anywhere between 3 and 4x of leverage up to 3 of IITA, over 5 of IIA, you know, it's 4.5, 5, it depends, you know, it depends if that's senior, but if you're doing meds where it's interest only, it could be 6, and it's still. It it still works because it's only interest in, in some type of a pick at the end of the year. Yeah. And what's the goal for this new project? You you raising the 70 million, making the acquisitions and doing the roll up, and then selling to another one of these 200 private equity companies? Are you looking for a specific Number in the exit or? Yeah, so, so the exit would go either to another private equity firm that wants to continue the story because we have traction and we still got a big pipeline to fill, or we sell to a strategic, which is basically someone else doing the same thing we are, that's private equity backed. Right, right. And, and, you know, the, the theory is that At, you know, 20 million of Ebita, we, we can get 15x. Yeah. And that's a big payday for everybody, you and all the small, yeah. Yeah, that's it, that's the arbitrage that goes for. It's like, if somebody was just starting out in your business, wanting to acquire, where, where, where's the best place to start out? Say you, you know, find that first practice that's doing this, this and this and, you know, buy them with debt or equity, whatever you got, and then washrs repeat, maximize cash flow, washrs repeat. Yeah, so, I mean, look, we're, we're a DSL, right? So we don't own the practice. So if you're, you're, if you're a non-dentist. You have to have a dentist partner. Or you can't own a practice, because the dentist owns. The patient base, the DSO would own the non-clinical assets of the organization. Yeah, right, and charge a fee to provide their services. Yeah. So that I don't want to create the confusion around it that. No, I get that. However, in Arizona it's the same way in the medical with the hip on everything, yes. However, in Arizona, a non-dentist can own a dental office. Oh, is that right? Yeah. There's a few states Yeah, I think uh they just uh passed that in Arizona for attorneys too. They can own. Oh really? You don't have to be an attorney. Yeah. Wow, interesting. Yeah, I had a conversation a while back on that. Um, that's really interesting. Yeah, so where do you go to continually, uh, get better at skills doing what you do now? I mean, You know, I read a lot, you know, I go to different other conferences, uh, or masterminds, if you would, just to get out of the dental thing to see, you know, how I can bring what successful people are doing in the outside world into dental. Yeah, yeah. What kind of masterminds are we talking to? You know, I, I do, I, you know, I've done the gel polish stuff, I've done, um, um. Peter Diamantes 360, um, which, which I still go to those, not, I don't go uh Joe anymore, but I will at some point in the future. Strategic coach, right? He's, he's been great. Dan Sullivan. Dan Solomon, yeah. Yeah, these are all things that Joe Polish. I'm very familiar with each one of those guys. That's great. And look, I, I, I love the time, uh, there's a picture of a kid. Is that your grandkid on the uh Gmail? It it's my son. It's your son. How old is he? Yeah, he's, oh, he's 8 now, but yeah, I'm, I'm, I started late. Yeah, you're start. No, you're not starting late. I'm, I'm 60 and I got a 14 year old, so. All right. Yeah, I, I don't know if that was a good decision or bad decision. This just is what it is, right? I, I agree with the comment. Well, then, and I really appreciate the time, uh, talking with me about your, your uh current roll up and your current advisement business and uh working with everything. I wanna thank you so much for that, man. Yeah, I mean, thanks for having me. This has been fun. Good deal then. Thank you so much. All right, thanks. Cheers. I appreciate it. Bye.