By Tom Schramski, PhD
Volume 1 Issue 18, September 30, 2014
The healthcare market is as active as it has ever been in our lifetime. Consolidation pressures, pent up baby boomer desires to transition, and the continued emergence of private equity group (PEG) interests have created significant international attention on the US healthcare environment.
The market has matured in many areas, leading to evolved best practices for today’s M+A advisor. These include:
It’s not simply understanding a multiple of EBITDA, but the inclusion of an analysis of the value for different buyers depending on potential synergies and investment perspectives, with multiple values at many points in time.
Sellers have expectations in a variety of areas and want to know how they play out in real life – it’s not that the seller has to “be realistic,” it’s more about fully understanding the potential implications of expectations and how the market will respond, without making a judgment about the seller’s intentions.
Along with the prior best practices, a skilled M+A advisor assists sellers in understanding buyer psychology so they will be more fully prepared for a successful negotiation and transaction. You don’t have to agree with the buyer’s view, but, if you can respect the buyer’s perspective, you are often able to craft a better transaction.
A competent M+A advisor assists a seller in identifying necessary resources required early in the representation process so the seller clearly understands the impact of certain factors (e.g. corporate status and taxation) on the transaction process, especially the proceeds that will (or not) be realized at closing.
Distraction will always occur in the negotiation process and the M+A advisor’s role is to help the seller maintain their focus on intended life goals with the possibility of multiple ways to get there.
While there is always the awareness that an M+A advisor’s livelihood is typically based on a transaction fee, sellers and buyers will rely on the integrity and competence of the advisor because of a simple fact – you’ve been there before and you’ve helped others make a successful journey. This is especially important because, for most sellers, they are experiencing a once-in-a-lifetime event.
In a turbulent and exciting healthcare M+A environment, there are innovative technologies, new avenues to make deal connections, and increasingly sophisticated models for evaluating business potential. These are incredible trends that benefit all parties. However, at the foundation is an increasing reliance on basic values that make the best practices of today’s M+A advisor stand out in the crowd.
Tom was the Founder and Managing Partner of VERTESS. He was a Certified Merger & Acquisition Advisor (CM&AA), consultant, and Licensed Psychologist with over 35 years of very successful national experience in the healthcare marketplace, including co-founding and building a $25 million behavioral health/disabilities services company. Tom represented sellers and investors across the healthcare spectrum and was recognized for his executive leadership in the 2005 Entrepreneur of the Year issue of Inc. Tom passed away in December 2018.