The Buyer Side of M&A with Cosmetic Physician Partners

June 7, 2023

In this episode of the Legal 123s with ByrdAdatto, we are joined by Daniel Schacter, CEO, and Sean Walsh, VP of Partnerships of Cosmetic Physician Partners (CPP). CPP, an alternative to private equity, is building a network of physician-led medical aesthetic clinics in the US. Daniel and Sean provide insights into the M&A process from the buyer’s perspective, including challenges that slow down these transactions.

Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at


Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences, creating simplicity in 3, 2, 1.

Brad: Welcome back to another episode of The Legal 123s with ByrdAdatto. I’m your host, Brad Adatto with my co-host Michael Byrd.

Michael: As a business and healthcare law firm, we meet many interesting people in various stages of their business. This season, we get to focus on the high stakes implications of selling a business. This season’s theme is The Hitchhiker’s Guide to M&A. We have been guest heavy all season and have brought in different professionals to offer their experiences and perspective on M&A.

Brad: Yeah, and for those that don’t know, Michael, used a fancy word: M&A. That means Mergers and Acquisitions, which really is just the buying or selling of a business or buying or selling of all the assets over the business. Now, Michael, today we have guests joining us from another country. Do you think they speak English?

Michael: Well, [00:01:00] Brad, first they are here…

Brad: Oh, yeah.

Michael: With us right now, so that’s kind of an awkward question too. Do you have a plan on how we would have an episode with people that don’t speak English? Given our very limited language understandings beyond English.

Brad: That’s probably true. I barely speak English as it is.

Michael: Yeah, you speak Brad.

Brad: I do speak really fluent Brad.

Michael: Yeah. Why are you bringing this up?

Brad: Yeah, well, our guests live in different cities in Canada. We have one in Calgary and the other one in Montreal. What I was thinking about was Calgary’s on mountain time zone, Montreal’s in Eastern time zone, and we’re sitting here in central time zone.

Michael: What I’m hearing is that you might need some summer school because you think that somehow language relates to time zone.

Brad: They don’t relate?

Michael:  No, Brad.

Brad: Well, and more interesting is both our guests went to Oxford University in the United Kingdom.

Michael: Well, you’re really looking bad now.

Brad: And the fun fact, today,  as we’re recording this, my daughter is [00:02:00] actually visiting Oxford, while recording this show.

Michael: Wow.

Brad: So, I was thinking about if we decided to add my daughter to this podcast, we’d have to get her from Oxford, and they’re under right now (BST, which is British Summertime), which is interesting. Sometimes they move over to Greenwich Mean Time, and that really depends on the type of year. It seems like a lot of math involved.

Michael: Yeah, and you’re probably losing our guest. You’re definitely losing me and I can’t even imagine what the audience is doing right now.

Brad: All right, on today’s show, Riley had to coordinate two countries, three different time zones, and obviously for the show to work, since they’re here, it’s working. But if we couldn’t agree on common time references and we kept splitting up time differences between whims of each city or state or country, it’d be really hard to coordinate calls or meetings, and more importantly, this podcast.

Michael: Your deep thinking knows no ends, Brad.

Brad: Yes.

Michael: I’m not sure where you’re going with this.

Brad: Yeah, well, for those who don’t know, [00:03:00] scientists right now are struggling to know what time it is on the moon. Currently, their moon missions are run on time zones of whatever country it is that’s actually operating the spacecraft. So the moon, again, we’ve talked about this in other episodes, is a new hotspot. Everyone wants to go there, including private companies, and everyone wants to capitalize on the moon. The European Space Agency wants the moon to have its own time zone.

Michael: It’s all making sense now. If it wasn’t an eighties movie’s reference, it was gonna be some sort of sci-fi space related topic.

 Brad: Well, so this is Michael, how looney it gets, pun intended. On the moon, clocks run faster, and each day lasts as long as 29 and a half Earth days. But do not panic again. The good news is the international consortium of experts is gonna take this challenge on. So, with their pocket protectors and their protector rulers, they plan to map out new time zones on the moon. I just hope they don’t do the whole daylight savings time thing.

Michael Well, I’m not panicking because [00:04:00] I did not know that this was a problem that needed to be solved. I’m glad to hear that it’s being solved.

Brad: Yeah.

Michael: Seriously, that was more interesting than I thought it was gonna be.

Brad: Yeah.

Michael: You redeemed yourself a little bit.

Brad: Awesome. All right, well, Michael, we have our guests who are patiently waiting, and before we bring them on, this season we’ve really been concentrating on the M&A and talking about what that looks like. That’s part of a season in business, and we’ve talked about it in each episode. But maybe you can give the audience members who are listening for the very first time a quick recap?

Michael: Yeah, we’ve talked all season about the importance of the seasons of a business. I love that we have some buyers on today.

Brad: Yes.

Michael: That can validate, hopefully, the premise, which is that every business is in one of four seasons. They’re in the building season, they’re beginning the infrastructure order, or they may be in the operating season, living the day-to-day grind. They may be scaling in that season, or they may be in the buying and selling season. And the premise is that [00:05:00] every single season plays a role if you end up selling.

Brad: Yep.

Michael: So it’s important to pay attention, no matter where you are, which is, of course, all the episodes this season. Our theme has been M&A.

Brad: Yeah.

Michael: The Hitchhiker’s Guide to M&A. And we talked about the five phases to an M&A deal: you have the LOI, due diligence, the definitive agreements, then we go to closing and post-closing obligations. And so, we’ll look forward to getting the perspectives today from our guests.

Brad: Yeah. Well, Michael, why don’t you bring on our guest today.

Michael: Okay. So we have Daniel Schacter and Sean Walsh with Cosmetic Physician Partners joining us. Now we have four of us on; we’ve pulled this off a couple times now.

Brad: Yes.

Michael: So, Dan is the president of Cosmetic Physician Partners based out of Montreal, Quebec. He has successfully built two companies from the ground up, his most recent having grown a company from an evaluation of $10,000,012 to $500 million, with over 400 employees. He’s trained in accounting at Deloitte and operations management and sales growth at McKinsey and Company. Dan holds a BCom in accounting from McGill University and an MBA from Oxford University, as you mentioned earlier, where he graduated with first-class distinction and on the Dean’s list. If you need, after the show, I can explain what all these mean, but they’re really important.

Brad: Yes. Sounds really good.

Michael: This is also Dan’s second time joining us on the podcast. And today, joining us is Sean Walsh. He is the Vice President of Partnerships at Cosmetic Physician Partners. Sean brings strategy and finance capabilities to CPP, developed through his experience with Boston Consulting Group and Tri Wests Capital Partners. Sean is responsible for onboarding new clinics at CPP, managing the legal, financial, and operational requirements and processes. Sean has a Bachelor of Engineering from the University of Victoria, and as mentioned earlier, an MBA from the University of Oxford. And I hope you just feel a little less smart right now, Brad.

Brad: I always feel a lot less smart.

Michael: Okay, we just need to stick to the questions today.

Brad: Yeah.

Michael: And let them do the answering.

Brad: No doubt.

Michael: Okay, great.

Brad: Well, welcome, guys.

Daniel: Thanks so much for having us on on the show.

Brad: Well, gentlemen, since y’all are a lot smarter than us, maybe y’all can help us out here. You know, there are all these different time zone talks that we had earlier. Do you have any recommendations to the scientists that are coming up with these new moon time zones?

Daniel: I don’t have a recommendation, but I didn’t know that—I didn’t realize there were 29 hours in a moon day versus a regular Earth day. I never even thought about the time. What time would it be in space? But it’s a good question.

Brad: All right, well, [00:08:00] again, we appreciate you guys being here, and I guess we’ll jump off time zone and moon zone talk. Michael, maybe we can just jump into why we brought them on.

Michael: Yeah. Well, first I’d love to hear just a little bit from each of you. Talk to us about Cosmetic Physician Partners. Introduce the CPP to our audience and a little bit about what your roles are.

Daniel: Absolutely. You know, sticking on that moon theme, it definitely feels a bit like on a rocket ship right now. So, you know, thanks for having me on the show. CPP has been a really fun ride. We started back in Canada around 15 years ago, building up our Canadian side of the operation. And what we realized early on is that clinic owners generally are phenomenal at treating patients and they are really, really good at customer [00:09:00] experience. But they might not be so great at a lot of the business administrative type of processes—accounting, finance, cash management, and even a lot of the times in marketing. Some are great at it, some need a lot of help. That’s where CPP comes in. Today, we’re building one of the largest networks of medical aesthetic practices across the US. We have more than 20 clinics doing more than a hundred million of revenue and growing extremely fast. And, you know, I’d say there are three things that really make us unique relative to some other groups. First, we’re very people-focused. Every single clinic before joining, we go out and visit in person multiple times. You might say, ‘Isn’t that table stakes?’ It isn’t. People write checks without ever meeting the clinic. It’s crazy. Second, operations. We are massive on the operations side. We’ve built the business in Canada for over 15 years and done extremely well. The US side is now very, very large and very healthy. We do it through amazing central teams like marketing, IT, HR, and so on. I think, you know, I’m a data guy, so the numbers speak—growing more than 10% year over year for same clinics and profits more than 30%. We’ve finally, we’ve actually done it before, so in Canada last year we did a nine-figure liquidation where a lot of our partners were able to take some money off the table but still stay in place, keep running the business, and have upside in the future. Remember, if, you know, if my data serves right, I don’t think any other group has ever done that in this sector before. So, you know, we have the background to do it, but we’ve also, you know, proven the results. That’s a little who we are.

Brad: That’s awesome.

Michael: That’s amazing. Sean, talk a little bit about your role with CPP.

Sean: You bet. As the Vice President of Partnerships, I am responsible for every step that starts with engaging new [00:11:00] prospective partners—people who are interested in joining CPP—all the way to supporting them as they come on board and start to use CPP’s systems and every step in between those. It’s really, really exciting to watch these, as Daniel said, these great little businesses join into the network and take advantage of both the resources that a company like CPP has to offer and the benefits of scale, such as purchasing. So, really just getting them up to speed so that they can operate as great partners within the CPP network.

Brad: Very cool. And, as Michael mentioned, Dan, you were actually on our episode in season eight, and since season eight to now, it sounds like y’all are growing a lot. Is there anything else that’s happening at CPP that’s changed since the last time you were on?

Daniel: That’s a good question. I think before the show, Sean did some quick math. Apart from adding, I think, 17 practices to our group, we’ve built out a [00:12:00] number of central teams that are just dedicated to our clinics. So, everything from IT and analytics to, we just built a new best practices team who goes into clinics and takes the best practices from all the other clinics, and just like one really cool technique after the other. We were looking at one the other day with a different type of needle that has dramatically reduced shrink, meaning the waste of like Botox or dispo. Just like a small thing like that can save, you know, hundreds of thousands of dollars to a clinic. So, imagine what you could do if you had a 30-page book of it. So, a lot of cool stuff going on here.

Michael: And I’m gonna ask a question I know the answer to, but I’d love for you to share: You guys acquire or partner with practices that are both surgical and nonsurgical?

Daniel: Correct, correct. We have just pure, you know, you can call non-core, just med spa only, as [00:13:00] well as plastic surgery med spa, or derm med spa. Those are the typical three that are part of our group.

Michael: And are there any certain areas of the country that y’all are focused on, or is it just world domination?

Daniel: We care a lot more about the people than the location. So you can imagine our frequent flyer miles are very high in traveling around the US, but it’s the people that we’re focused on and a little bit less of the location.

Brad: Makes sense.

Michael: Cool. Well, kind of talking about deal flow a little bit, I’d love to hear from you guys some lessons you’ve learned as a buyer. And for a little context, you know, we’ve spent a lot of time this whole season trying to educate our audience on M&A, and we’ve had different guests on. You bring a unique perspective as someone who’s actually on the buy side, looking to [00:14:00] acquire. So we’d love to kind of hear from your view of the world, some lessons you’ve learned when looking at potential sellers.

Daniel: Yeah, absolutely. I think my number one lesson, and then maybe Sean, you can say what you think it is on your end, is that culture matters. And you would say, “Well, yeah, I get culture matters,” but I really do mean that. We have found statistically that a strong culture has like a 90% correlation with high profits. And what ends up happening is clinics that have a strong culture, you walk in the door and you can feel it from whether it be the music to the way the front desk smiles at you, to the way the provider treats you as they walk you to the room and explains how things are going. Interactions in the corridor, patients have higher retention. Patients are more willing to spend [00:15:00]. Patients want to be there. So then one of the biggest learnings I have is if you set the right culture, everything else is secondary to that. And that’s really what leads to amazing success and what we look for in a great clinic.

Michael: Yeah, I was going to say, a follow-up question is how do you discern culture when you’re looking at a target?

Daniel: Yeah, it’s a great question. So number one, we visit every single practice. I have been to, I think, almost 70 practices in the last year and a half.

Michael: Oh wow.

Brad: It is a lot of flying.

Daniel: It’s a lot. It’s a lot. You feel it the moment you walk in the door. I’m sure you guys have, you know, walk into a, it doesn’t have to even be a med spa. You walk into a hair salon, walk into your dentist’s office. The way the front desk talks to you, the way that people talk about each other in the office, how do they talk about the MD or the owner? All of those things really quickly get us a good sense of culture. I mean, we go over above that. You know, we have lots of surveys that we can do, and we do on a pre-acquisition side as well as post-acquisition. It matters. But you don’t even need a survey. Like I think our spidey sense is good enough now where you walk in and you meet a few people, and you’ll know very quickly if culture is good and healthy there or if there are some underlying problems.

Michael: Well, you’re speaking Brad’s language when you called it spidey sense.

Brad: Yes, I like that a lot. I put a check mark next to your name. Sean, you got any thoughts on that one too?

Sean: Yeah, I think its always interesting. I absolutely agree with Dan. I know there’s maybe two things I would pick up that I’ve learned through our work at CPP. The first is building trust in the, I’ll say, the M&A process. That’s been kind of an evolving thing for us. When CPP was getting started, we were starting with people, a relatively tight-knit community, and so I would say like a lot of people knew each other, and we could go off our word. As we grow as a network, really, I think you guys will know that there are examples in the market of M&A that doesn’t always go well. And so one of the big things about CPP is honesty and transparency and really establishing that trust for the M&A process and different ways you can do that. That’s been both really fun and interesting, but always a challenge: how do you establish that trust with the counterparty, to tell them that their business is safe if they choose to join the partnership?

Brad: That’s a good.

Sean: The other thing that I think a number of your listeners can relate to, is M&A can be very exciting. The big part of it, and what I would argue is probably the most important part of it, is the integration side of it. And it can occasionally get lost in the heat of the M&A, but it’s far more important in terms of the successful outcome of clinics joining a partnership. So those have been two big learnings for us as we grow as an organization.

Brad: Yeah, great points. And, you know, Michael mentioned earlier the five phases of an M&A deal, and as you guys are aware, each phase has its own unique aspect to it. But in y’all’s opinion, what do you think is the hardest phase and why?

Sean: Do you want to take that one, Daniel, or do you want me to?

Daniel: You.

Sean:  Yeah, just picking up on that same thread that I ended on. The integrations work, it. Every business is unique. It has its own way of working. They have organizational habits. They’re used to doing things a certain way. But in order for them to take advantage of joining a network like CPP, they need to integrate, at least in part, with the systems we have, whether that’s our IT, they like to use our marketing, our data and analytics. It introduces a new way of working. And as mentioned, you can get very busy in the legals and the diligence work and forget that. Come joining CPP, things change. And how do you set them up for success as part of that? Especially when the office manager is underwater running a business, and then you add in M&A to that, and then you have to teach them to work within our systems. There’s a lot of work there. And that’s where the focus needs to be as part of the whole process.

Brad: Yeah, that’s a great point. Dan?

Daniel: Couldn’t agree more. In the last six months, we built out an integration team who co-locate at the new clinic to take that work or some of that work off the clinic, for exactly the reason Sean said, so I couldn’t of said it better.

Michael: Yeah, interesting. Well, I’m gonna have you take your CPP hat off for a moment and just put yourself generally in the shoes of buyers in general. And so you’ll be looking more broadly and just help educate our audience on some of the mistakes you’ve seen from buyers generally that can bog down the process, and if it were fixed, it could make it more efficient?

Daniel: Yeah, I guess, good question. I can think of two situations off the top of my head. One, which happened recently, I think there’s a mistake. You know, a lot of people are gonna hear about multiples, meaning you take your profit and you multiply it by that multiple number, and that gets you to the value. And a lot of people forget that there are two sides. There’s the multiple, but there’s also the profitability. So we had a clinic who just joined, who was with another group before that. You know, they did the LOI and they got to the end. And when you get to the end of the LOI process, before you close, you do something called a quality of earnings where you have an accounting firm that comes in and looks at your books. And without going into too many details, the profitability dropped by like 30% between the start and the end. So when they started, they thought the multiple was really good, but they had a really, really low profit or much lower profitability than they thought was right. And I think the mistake some people make is that they focus too much on that multiple and not the whole thing, which in my opinion is the final number, is the final number a really good number or not? Does it stay there? And in this case, it led to the deal with that other group collapsing and then coming and joining us and having a really straightforward deal from the whole time. So, how, I think that would be what I noticed.

Michael: How much work, and I’m not necessarily asking CPP specifically, but how much work do the buyers put into trying to get a good profitability number at the LOI phase?

Daniel: It should be a fair bit of work, right? Like you hire an external accounting firm, and these things cost well over $50,000, paid by the buyer, not the seller, to do the work. The issue there is that there are two ways it can be done. One way is that it’s done together, meaning the accounting firm is working both very closely with the buyer and the seller in a transparent way to show what the numbers look like. We’ve also seen situations where it’s done just with the buyer, and as everyone knows, you know, if I ask you what color is the moon, there are 20 different answers you can give. The same is true with the Q&A. So, you know, we’re big believers in doing it very close together. But you do see some of those times where it’s very much one-sided, and the number can be very different. So, our advice, I know the call out, is to work together with the accounting firm during that QV phase really closely. If you’re a seller, demand that you’re working very closely with it; otherwise, you can see your profits drop really quickly, and that dramatically changes the final number you get.

Brad: Yeah, that is a great point. Sean?

Sean: One of the things we try and do, because as you, I think, as you indicated, some of these businesses don’t always have the cleanest books, so you’re showing up, you’re trying to prepare an offer off incomplete information. And one of the things we try to do to the best of our ability, one, is transparency. Hey, we can work with your accountant 101, then they’re validating what you’re coming up with. But two is making sure everybody is comfortable with the mechanics. So you outline, here’s what revenue is, right? If you’re getting revenue from a side business that we’re not buying, we can’t count that as revenue. Here’s what a personal expense is that we’re gonna pull out, and one of the ways we do that is we actually just give them the workbook and we say, ‘Put your own numbers in, test our assumptions to see what happens.’ If we find additional personal expenses, we can come up. It’s never gonna be perfect. We’ve yet to really nail exactly down to the cent what the profit figure is, but creating that transparency is key. So at least they understand the mechanics. So when we get into the QV phase, they understand the work that’s getting done and they can test and prod and make sure it’s above board.

Michael: Excellent, just as I expected. You guys were amazing and insightful and brought a different perspective to what we’ve been walking through this entire season. We’re grateful to have both of you on, and so we appreciate it. We will go next into commercial. We’ll say goodbye to you guys, going to commercial. And on the other side, Brad and I will do a little legal wrap-up.

Brad: Yeah. Thanks for joining guys.

Michael: Thank you.

Sean: Thanks for having us on.

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Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto. I’m still here with my co-host, Michael. Now, Michael, this season’s theme is ‘Hitchhiker’s Guide to M&A,’ and today’s show, just like the whole season, we’ve been focusing on M&A. But I love the fact that Sean and Dan from the CPP joined us to really focus on the buyer’s side of a deal.

Michael: Yeah, and they walked us through, first of all, you know, if you weren’t intimidated by their credentials, we sure were.

Brad: I was.

Michael: I mean, yes. You know, we’re almost afraid to ask the questions. Very impressive, guys. And what’s really unique about them, CPP, is that they’ve been around doing this in Canada for several years. I think they said 15 years.

Brad: Right.

Michael: And so they bring some experience on physician consolidation to the United States, and it’s, at least in aesthetics, this is a newer market. It’s the last couple of years when you’ve really seen some major growth in this area. And so it was really interesting to gain some perspective on what they look at and how they experience things because I think it can be really insightful for the rest of our audience who may be a seller or a future… Everyone potentially is a future seller, right? And then, of course, for the buyers out there, they may have gained some wisdom as well. Talk about your takeaways from today, Brad.

Brad: Yeah, so I think, you know, we often talk about in the five phases, the post-closing legal obligations. And that may be certain things have to get filed, and we often say that’s a boring phase of the because the deal’s been closed. But I thought Sean and Dan brought up some great perspectives of the non-legal things that happened post-closing, and that really is understanding, hey, you’re doing a shift here. You once may have used this technology to record your billing, but now you’re using our technology, and you may once have used this type of needle, but we found one that’s better and it’s still consistent with the standard of care, and it’s gonna save you a lot of money. Or we now know how to market you a little bit differently, and that’s why you’re partnering with us. So that shift from those post-closing obligations and really onboarding those new practices into the CPP model, I thought it was fascinating to hear their perspective. And I think Dan said this, which I think is a really important takeaway, is culture matters. And so if when they walk in and they see a place with an incredible culture, I think they also know on the back end, after the deal is done, if you have a great culture with great attitudes, there’s gonna be a lot of new learning that they’re gonna have to figure out with your team. And I believe that’s gonna help them transition better into the CPP model. So again, for all the individuals out there, understand if you are looking at a deal, understand that you’ll be partnering with these people from three to five to 10 years, and you really don’t understand how your team will react to that. So I thought it was all really great takeaways. Michael, what are your final thoughts?

Michael: Yeah, I mean, I think multiple times this season I’ve talked about kind of this idea that buyers tend to either look heavy at the team or heavy at the compliance.

Brad: Yeah.

Michael: That’s the things that can make or break a deal. And so clearly, you know, you hear the answers today, and CPP is a team-oriented, not to say that compliance isn’t important. It’s not that at all. It’s that they identify that as kind of the secret sauce. And I loved the Spidey sense thing.

Brad: Yes!

Michael: But, you know, what does that even mean? How [00:30:00] do you do the body sentence? Well, it’s spending time, building trust, going and laying eyes on it was really insightful. And that actually connects to the other big point he had, which was mistakes made and talking about everyone lumps onto the multiple that people get and forget about the valuation or the number, the profit number. And how do you arrive at that? And so, again, you know, the challenge at the front end is how do you come together and agree on what’s a good profit number to hopefully minimize the chances that this Q of E would skew a 30% change in numbers that would really threaten the deal. And so, my overall takeaway is that they really prioritize investing time into the buyers for that future partnership. [00:31:00] And, of course, I guess you knew that, Brad, because you started the day talking about the moon and time issue. So maybe the people that are all coming together to figure out what the time zone should be in the moon can take a few lessons from CPP.

Brad:  Love it, Michael. All great points, audience members. Well, Michael, unfortunately, next week we don’t have smarter people joining our podcast.

Michael: Oh, no.

Brad: It’s just gonna be you and I, but we will take a deep dive in negotiation tactics for M&A deals.

Outro: Thanks again for joining us today, and remember, if you like this episode, please subscribe. Make sure to give us a five-star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by [00:32:00] guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.

ByrdAdatto founding partner Michael Byrd

Michael S. Byrd

ByrdAdatto Founding Partner Bradford E. Adatto

Bradford E. Adatto