Summary

In this conversation, Jon Stoddard interviews Vin Cardillo, CEO of Meava Dental Advisors, who shares his extensive experience in dental acquisitions and advising. Vin discusses his early career, the growth of his dental practices, and the strategies he employed to navigate financial challenges. He emphasizes the importance of data in scaling dental practices and the role of private equity in the dental industry. The conversation also covers marketing strategies, organic growth, and investment approaches for aspiring dental entrepreneurs.

Takeaways

Vin started his first dental practice in his 20s.
He acquired practices at advantageous prices after a private equity firm went bankrupt.
Dynamic Dental Partners grew from 3 to 31 offices in 28 months.
Private equity firms are increasingly interested in dental practices.
Data analysis is crucial for scaling dental operations.
There are currently 200 institutionally backed dental companies.
Vin aims to scale to 80 locations in five years.
Dentists need to have a strong team to support growth.
The dental industry is seeing a shift towards partnership models.
Maximizing cash flow is essential before pursuing growth.

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Transcript:

Jon Stoddard (00:00.142)
Welcome to the top &A entrepreneurs. Today my guest is Vincent or Vin Cardillo. Vin is the CEO of a company called Mava Dental Advisors. He has been doing dental acquisitions and advising since 1990s when he was in the 20s. Is that correct? Yup, 1996 or so. Thanks, John. Appreciate it. Yeah. Well, thanks very much for joining me. I got to tell you, you and I

I 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, what was the first name in the company that you started? Yeah. So in the nineties, the first one was called Northeast Dental. So I had started with one office and, that was a fresh start, which we call kind of a de novo. And then

I purchased two and then I did another de novo and I purchased one more and then did another de novo. All of my 20s. All in your 20s. Now, how did those opportunities come to you? Were you looking for them or did somebody just come to you and say, hey man, I don't like doing this. I can't make it work. I can't make money. What did that look like? And how were 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, you know, we, our goal was to grow and we opened up another one. And then there was a company that was private equity backed that,

and they went bankrupt. So they had these practices that were still going, but they had the vest of them. So, you know, we looked at them and did our diligence and were able to buy them at a very, you know, advantageous price. I mean, cheaper than it would cost us to build it from scratch. So they had a, 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.

Jon Stoddard (02:21.175)
Who did you buy those from? The bank and receivership or the private equity? Through the management team that was still there. The management team from the organization was still there and they were divesting. Yeah. How did you, what kind of deal stack was that? Was that, 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,

you know, the offer was.

you know, I'm thinking about it correctly, probably 30 cents on what they were looking for. you know, they said no and walked away. And then they came back a couple months later and then they said yes to 20 cents. Couldn't find any other buyers that came back to you. Did you have to raise any money to purchase that or was it?

I had raised some local angel investor money prior to that. So I had some cash in the tillers, plus I had some bank lines, if you would. So this was in your business plan from MBDA, grow and acquire fast and then sell to a PE firm. Right, right. I ended up selling to a larger dental group. This is my first one. That's your first one.

So the next one was dynamic dental partners? Right, yep. So that was, we started that in 2011 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 five years, they're non-competes for up.

Jon Stoddard (04:19.233)
They wanted to get back into business and 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 three offices and in 28 months we had 31. Yeah. And that's Alex Gianni, right? You're partnering, you were CEO and founder of that. What did that partnership look like as far as the cap table? mean, it was 50-50 or what it was, it just kind of minority interest. Yeah.

So I was the COO. So I basically managed and rolled up the operations for that then to be sellable, if you would. And our partnerships, me and the two docs and another guy, we were pretty much even partners. And then as we brought on these other practices, this was coming out of the last recession, if you will.

So there was a lot of practices in mass, I mean, in Florida and in Arizona that had, 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 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.

towards the end that had a few practice 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'm in the Tucson, Arizona, not the Phoenix area. Yeah. So, mean, look, these were good practices that just had too much debt. So they just need to have a

You know restructure their their their debt table really or the cap table on however we wanted to manage it So we were able to do that And in an orderly fashion where we were able to bring these practices together Show that they could be positive results partnering with us and We pulled it off. Yeah, and you were number

Jon Stoddard (06:43.917)
14 on the INK 500 list that year. Yeah, I saw that. That's pretty amazing. When you renegotiate that debt, recapitalized, did you start, when did you start the relationship with Huron Capital? After. So we already had to have deals completed or deals in an LOI or some type of commitment 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 them on 28 months ago. Here's what it did. We have practiced a quiet practice number two and you know, three months later, here's success, you know, practice four or five and six on one four. And here's, know, the story, right? So we had to have a good story around, you know, what we're doing. It's just not slapping together saying, you know, here you go. Yeah.

Yeah, I'm going back to that kind of taking on too much debt. You had to get some more debt renegotiated to a lower monthly price. What kind of company took that on? Was it a bank or was it an institutional investor? Yeah, so in the end, how it came down, we had a number of practices that we owned outright, maybe, I don't know, seven of them or eight 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, a partner that had like 10 locations that was going to come in. So we basically.

we didn't really have to get much that, except for the six or seven or eight that we owned, we were packaging this altogether. okay. So some kind of agreement between those just to, you know, right. Future multiple. We had a management contract saying, hey, look, we're doing your back office, we're doing all your accounting, we're doing ops for you. So we brought in our back house for a fee, right?

Jon Stoddard (09:11.361)
that allowed us to show the success and to bring all the financials under one umbrella, operations under one umbrella. And actually back then we actually converted those practices 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

Yeah. So if you only own one dental practice right now, what, and I'm sure you advise a lot of people on this, it's a what multiple of sales or EBITDA? EBITDA. EBITDA. And then what's that look like? One, two, five? Yeah. I it's, I mean, for one practice, it's three to five. Three to five. And you're, and what's the threshold to start moving up that EBITDA to where a PE firm's very attracted to it?

So PEs are looking at 3 million of EBITDA. 3 million, okay. Yeah. So and at that point in today's market, I mean, back then 3 million of EBITDA was 7X, today it's 10. Yeah.

So I mean, there's, you 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 EBITDA is 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 flow. 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 that's what NAVA does today. We help a lot of these, group practices scale by utilizing a

Jon Stoddard (11:23.629)
fractionalized C-suite. Yeah. How do you move that person that's just working in the business, the E-myth, and then move on, say, you know, 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, I mean, what we found is data doesn't lie, right? So we're able to start pulling data.

either out of their system for what's happening operationally in the practice, through QuickBooks and say, look, you know what? Your margins are pretty strong. Your payer mix is strong. You're running good practice. You're in there alone. You wanna grow. Let's get an associate in here. Now let's see if you could train that associate to provide the quality of care that you do at the...

at the speed that you do, let's say, or the efficiency that you do. 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 grown 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 eight, nine, 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, you know what those KPIs are. This is funny because I, when I worked on a marketplace, the KPIs for a marketplace are completely different than 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,

mean, the KPIs are not even similar. I mean, you got to do patients ones, but they're very, very different. Do you see most people when you reach out to them, they're ready to say, hey, I want to grow faster, make more money, like some kind of life changing exit, or are they happy working with people to people business? Yeah, know, a lot of them are happy doing what they're doing. You know, a lot of them don't even know that this is going on.

Jon Stoddard (13:51.413)
Right? However, it's becoming more more prevalent. Look, there's 200 institutionally backed dental companies right now. 200, yeah, I saw the number on the- Right, and they're mandated to buy and partner. you know, it's moving pretty quick. We're working on a DPO now, which is a dental partnership organization in the Northeast of orthodontists.

repeated on us in 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. We're looking to get our founders on board, which is about two and a half to three million of EBITDA 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 five years to 80 locations. Did you say 80 or eight? Yeah, 80.

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, you know, I'm going to be an investor in the CEO of it. OK, right. So Mavva will act as a third party to provide some services where needed if if we can't get it elsewhere for a better price. So we'll we'll utilize Mavva for fractionalization in the beginning until we can just start hiring our own people in turn.

Gotcha. And then you bundle it up and you're already, 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, have some, we have the ability 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 dynamic dental partner, how long did you stay with Huron? So interestingly enough, I stayed six months, but everyone knew that beforehand, because 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 two weeks and then we would go away two weeks. It just wasn't working. so, you know, shortly thereafter, I had left them.

Jon Stoddard (16:18.573)
Yeah. Did you do when they private equity buys, did they purchase a hundred percent of it or was it 67 and ask you to roll over another 2030 to continue working on more acquisitions? Cause 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. They've gone through a number of iterations.

but they've had it for a while. So, you know, in this particular model, you know, I would in theory be on for a while if I wanted to, 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 creative job of it as a product.

I, you know what, before I used to, because I'm an op, I was traditionally an operator and in the weeds all day. Yeah. 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. Yeah. And, but.

but it's fine because I'm focused on creating our own DSO DPO at the moment. And are you doing more or less traveling than you used to do? Yeah, so I'm doing more traveling in this market, visiting doctors and all, right? So we've got a biz dev team that I'm working with to try and drum up these opportunities.

Yeah, we've got like a pipeline of 20, 25 deals right now. Obviously, they're all going close. 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? Exactly. How long does that presentation last? I mean, does it blow their mind or do they get it? Yeah, by the time they're on the call with me, 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

Jon Stoddard (18:41.677)
and we can potentially create a path for them. Others really get it and say, look at, you know what, if I can join out with the right partner, in 10 years, I can have that support and I can keep growing practices. 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 that when I was younger either, but these opportunities didn't exist when I was younger. 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, DPO Dental Partnership. So we really partner with you and we're kind of the private equity firm that actually knows dental for them. So it's kind of like a DSO within a DSO.

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 capital, but obviously less than the private equity is putting in. mean, yeah, yeah. Going to be pretty substantial. But what happens is, so let's say you got three practices and you're like, then, you know, I'm just getting it going here. I got three practices. You know, I want to keep growing and we'll put out a model that says, OK, look, we're going to come in and purchase 60 percent. You're going to roll 40 in.

And now look, we're 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, two or three 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. Okay. Yeah.

And are you looking for a specific, or you have targets like, obviously what you're doing here is wash, rinse, 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,

Jon Stoddard (21:03.653)
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. And usually when they're ready to make that transition, does the business already have the cashflow to support the next doc up or there's plenty of space in there? Yeah. yeah.

Interesting. And you also bring organic type growth ideas that you've seen through these nearly a hundred probably different dental practices that you've worked with. Yeah. mean, look, you've got, it's like a one, two, three approach right out of the gate. It's, working with them on a budget and, you know, working with them on track and metrics, you know, we'll get a good bounce on year one, just doing that.

Right. What kind of about 20 % 30 % or 12 %? You know, that's, that's the average that I've seen. The good ones are higher, right? The ones that embrace the relationship. Yeah. 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, one's

you know, they might hire you, but they may not want to listen to what you say and there's not going to be a job. And they don't do it, right? 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? Now we start 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 three days a week because that's all they want to work. Right.

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 cashflow before you grow. Excuse me. Maximizing cashflow. Yeah. Right. mean, a lot of these practices are not, you know, fully, fully utilized, right? They might be at 70 % utilization or 60 % utilization.

Jon Stoddard (23:27.893)
And when somebody says, goes like, I don't want to do that. You're still going to figure out how to get a hundred percent, even if it's not from them. Yeah. We're going to work with them, right? We're going to, you know, we're not going to 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 zero to 80 in five years. We can't do that with turnaround deals. We need good practices. Yeah. Profitable practice. 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. no, we fix them, but not in this particular model. Right. Right. Right. You know, on the consulting side of business, that's what we do. Yeah.

Now is this fund that you invest or purchase the businesses, is that from the proceeds of selling out to Huron and other stuff or do you have a fund where you're raising capital from other accredited investors? Yeah, no, so right now we're in market in two areas. One, bringing our founders together and two, 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 five years. Interesting. Yeah. How much debt and equity, what's the split when you purchase a company? I mean, it's all on what the doctor's going to roll and how big your EBITDAI is because then you can leverage, you know, the bank.

multiple of leverage higher. It's cheaper than the cash. Exactly. I mean, out of the gate, it's, it's more, 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 EBITDA. And then you can get, you know, better debt. Yeah. Right. Maybe, you know, at four X. So typically you're seeing, anywhere between three and

Jon Stoddard (25:54.125)
four X of leverage up to three of EBITDA over five of EBITDA, you know, it's four and a half, five, it depends, you know, it depends if that's senior, but if you do in Mezway, it's interest only, it could be six. And it still works because it's only interest in some type of a pick at the end of the year. Yeah. And what's the goal for this new project? You raise 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 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. Yeah. 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 theory is that at, you know, 20 million of EBITDA, we, can get 15X. Yeah.

And that's a big payday for everybody. You and all the smaller operations. Yeah. Yeah. That's it. That's the arbitrage. Every ghost store. It's like, if somebody was just starting out in your business, wanting to acquire, where's the best place to start out? Say, 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 wash, rinse, repeat, maximize cashflow, wash, rinse, repeat.

Yeah, so I mean, look, we're DSO, right? So we don't own the practice. So 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.

Jon Stoddard (28:12.245)
Yeah. So that I don't want to create the confusion around that. No, I get that. It's the same way in the medical with HIPAA and everything. Yes. However, in Arizona, a non-dentist can own a dental office. is that right? Yeah.

There's a few states.

Yeah, I think they just passed that in Arizona for attorneys too. They can own. really don't have to be an attorney. Yeah. Wow. Interesting. Yeah. I had a conversation a while back on that. That's interesting. That's real interesting. Yeah. So where do you go to continually, 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 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've done the Joe Polish stuff. I've done...

Pita Diamantes, 360, which I still go to those. I don't go Joe anymore, but I will at some point in the future. Strategic coach, right? He's been great. Dan Sullivan. Dan Sullivan. Yeah.

Jon Stoddard (29:42.093)
Yeah, these are all things that Joe Polish. I'm very familiar with each one of those guys. Yeah, that's great. And look, I love the time. There's a picture of a kid. Is that your grandkid on the Gmail? It's my son. It's your son. old is he? Yeah, he's eight now. But yeah, I'm starting late. Yeah, you're stuck. No, you're not starting late. I'm 60. I got 14 year old. So all right. Yeah.

I don't know if that was a good decision or bad decision. This just is what it is, right? I agree with the comment. Well, then, and I really appreciate the time talking with me about your current roll up and your current advisement business and working with everything. I want to thank you so much for that. Yeah, I mean, thanks for having me. This has been fun. Good deal then. Thank you so much. All right. Thanks. Appreciate it.