Your Primer to Healthcare Mergers and Acquisitions

Can They See Your Value?

Nov 27, 2018

by David E. Coit, Jr.

by David E. Coit, Jr., DBA, CVA, CVGA, CM&AA

Volume 5 Issue 24, November 27, 2018

Not long ago I listened to a compelling presentation by Monica Oss of OPEN MINDS on the evolving nature of value in healthcare. At the conclusion, she noted that value-based payments for healthcare services and products “are at the core of healthcare innovation” and “that providers must be able to demonstrate value internally and externally.”

The measure of value for any healthcare company is obviously about results, financial and otherwise. It also refers to the clarity of presentation of value and, as Berman, Knight, and Case write in Financial Intelligence, “the art of using limited data to come as close as possible to an accurate description of how well a company is performing.” When “accurate” becomes “cloudy,” it usually translates into questions and doubt, whether for a funding source, buyer or a potential investor.

Here are some reasons why the quality of your financials is so important:

For most healthcare businesses they are the first thing potential lenders, investors and buyers look at after a thumbnail outline of the nature of the company and whether or not it is a going concern. If your results are poor, that is one matter, but often the biggest concern is whether or not the results make sense from the financials themselves. The issue is a not-so-subtle one of competence.

Your financials are part of the trust that usually develops at some level between your healthcare company and an investor/buyer. If there is clarity and there is some challenge on your bottom line, trust can still develop. If there appears to be a myriad of difficult to decipher add-backs that create remarkably positive results, distrust usually ensues.

In my experience, the quality of financials is a projection of the personality of the owner, and this reflects the larger culture of the healthcare enterprise. How attentive are you to the daily needs of your healthcare business, including employees and customer relationships?

The quality of your financials is often related to how active your management and employees are in the operational accountability of your healthcare business. The clarity of the financials is especially important in healthcare companies that are not too dependent on the owner and are relatively transparent.

Buyers, customers, and funders don’t expect perfection. If they are seasoned, they understand adversity and the challenges that impact every healthcare business. However, they do expect to understand the operational truths of your healthcare company, and that’s why the quality of your financials is such a big deal.

David E. Coit, Jr.

David E. Coit, Jr. DBA, CVA, CVGA, CM&AA, CBEC

Director, Finance + Valuation/Partner

David is a seasoned commercial and corporate finance professional with over 30 years’ experience. As part of the VERTESS team, he provides clients with valuation, financial analysis, and consulting support. He has completed over 150 business valuations. Most of the valuation work he does at VERTESS is for healthcare companies such as behavioral healthcare, home healthcare, hospice care, substance use disorder treatment providers, physical therapy, physician practices, durable medical equipment companies, outpatient surgical centers, dental offices, and home sleep testing providers.

David holds certifications as a Certified Valuation Analyst (CVA), issued by the National Association of Certified Valuators and Analysts, Certified Value Growth Advisor (CVGA), issued by Corporate Value Metrics, Certified Merger & Acquisition Advisor (CM&AA), issued by the Alliance of Merger & Acquisition Advisors, and Certified Business Exit Consultant (CBEC), issued by Pinnacle Equity Solutions. Moreover, the topic of his doctoral dissertation was business valuation.

David earned a Doctorate in Business Administration from Walden University with a specialization in Corporate Finance (4.0 GPA), an MBA from Keller Graduate School of Management, and a BS in Economics from Northern Illinois University. He is a member of the Golden Key International Honor Society and Delta Mu Delta Honor Society.

Before joining Vertess, David spent approximately 20 years in commercial finance, having worked in senior-level management positions at two Fortune 500 companies. During his commercial finance career, he analyzed the financial condition of thousands of companies and had successfully sold over $2 billion in corporate debt to institutional buyers.

He is a former adjunct professor with 15 years' experience teaching corporate finance, securities analysis, business economics, and business planning to MBA candidates at two nationally recognized universities.

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