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Kikada Lane Dental is a corporate dental aggregator with a difference. The company aims to build genuine partnerships with practitioners, and is set to shake up the corporate model. By Shane Conroy
Dr Peter Hughes acknowledges that the performance of some corporate dental aggregators has left a lot to be desired. After more than 25 years in the dental and healthcare industry—including roles as managing director of Ekera Dental and global CEO of DinetiX (formerly Meridian Global Health)—he’s seen it all. Now, he’s determined to shake up the corporate aggregation model with Kikada Lane Dental.
Dr Hughes says the problem with some corporate aggregators has been a set-and-forget mindset. He believes some aggregators tend to mandate and punish their practitioners, rather than support and incentivise them.
“Some corporates have punitive models where they set targets for their practitioners and if those targets are not met, the shortfall is extracted from the practitioner’s commission payments,” he says. “I’ve never been an advocate for using a big stick to motivate a practitioner. It’s better to create incentives and work with them to achieve mutual benefit.”
This is the thinking behind Kikada Lane’s partnership model. The company takes a minimum 50 per cent ownership stake in the practice, and the practitioner retains the balance of ownership for up to five years. The practitioner also retains control over the clinical operations and the day-to-day management of the practice until they exit the business. There is no corporate rebrand of the practice, and no heavy-handed management mandates.
“We do not impose anything on any practice,” says Dr Hughes. “We offer our practitioners expert advice, support and access to our back-end services, but they have freedom of choice and final sign-off on all operational and clinical decisions. They are in every respect a true partner and shareholder who we treat with the highest level of respect.”
Building a nationwide network
Kikada Lane’s consultative approach recently received a strong vote of confidence with a $10 million investment from the Australian Business Growth Fund™ (ABGF).
“The dental industry is highly fragmented and ripe for consolidation,” says Ghazaleh Lyari, co-head of investments at ABGF. “The corporate aggregation model is not new, but we see Kikada Lane as the perfect marriage between clinical experience and business management expertise.
“There are no punitive clawbacks. Rather, practitioners are incentivised through multiple measures and retain clinical control of their practice until their exit. This is unlike other corporate aggregator models we have seen.
“Kikada Lane is a highly experienced team of seasoned professionals that bring a lot of industry know-how and business management expertise to the practices they partner with. This enables practitioners to focus on providing best-practice clinical outcomes.”
Since launching in 2019, Kikada Lane has already built a strong network of practices across four states. Over the next five years, the company aims to expand to more than 60 practices nationwide.
Dr Hughes says the ABGF funding will help to power this growth: “They have been so supportive with so many aspects of our business and have facilitated the business having far deeper pockets so we can continue to partner with practitioners using the Kikada Lane model.”
The bottom line for dentists
Dr Hughes is refreshingly clear and forthcoming about the financials that underpin Kikada Lane’s partnership model. The company makes an upfront payment to the practice owner equal to 50 per cent of the market value of the practice. Ownership of the practice is then transferred to a holding company with shares issued equally between Kikada Lane and the practitioner.
The practitioner follows a five-year exit strategy, with the goal to grow EBITDA (earnings before interest, taxes, depreciation and amortisation) by a minimum of four per cent per annum throughout that timeline.
“The practitioner receives an equal share of the net profit of the business through their time from acquisition to exit,” Dr Hughes explains. “If the practice has achieved a greater than four per cent annual EBITDA growth, then the practitioner shares in the same exit multiple as Kikada Lane—which we would expect to be somewhere greater than 12 times EBITDA, based on recent empirical evidence.
“If the practice hasn’t achieved four per cent annual EBITDA growth, then we still guarantee the practitioner a minimum of eight times EBITDA on the balance of equity they hold at exit.”
Providing smarter support services
The financial set-up of the partnership model means both parties benefit equally from the growth of the practice. This acts as a performance incentive for the practitioner, and creates financial motivation for Kikada Lane to provide practices with quality back-end services that genuinely support the practice’s performance and growth.
This comes in the form of a wide range of practice management services, including financial and tax reporting, payroll management, marketing, human resources, IT, insurance and training programs.
Dr Hughes says that when it comes to practice management support, one size definitely does not fit all. That’s why Kikada Lane takes a personalised approach to optimise the support they provide to each practice.
“We do a very tailored and measured assessment of what goes on at each site,” he explains. “Take marketing, for example. Most aggregators rebrand the practice and apply a generic marketing campaign. But we know there is a lot of goodwill tied up in a practice’s brand, so it makes no sense to rebrand. Instead, our marketing team sits down with each practice to come up with a marketing plan that works for them.
“All our support services are totally geared around each individual practice. It’s a growth mindset. We understand that our model isn’t for everyone, and some dentists just want to sell their practice and collect their commissions. But we know there are others out there who have a lot of ‘fire in their bellies’ and want to do better.”