Your Primer to Healthcare Mergers and Acquisitions

David and Goliath: Leveling The Playing Field Against The Big Boys

Sep 27, 2016

by Luis de la Prida

By Luis de la Prida, MBA, CM&AA

Volume 3 Issue 20, September 27, 2016

The story of David and Goliath depicts a battle between a young shepherd and a mighty giant warrior.  Over time, the story has come to denote a situation where a weaker opponent faces a much bigger and stronger adversary.

In the urgent care industry, a modern David and Goliath situation has been unfolding.  I am referring, of course, to the fact that smaller urgent care centers are increasingly being acquired by larger enterprises.

Armed with seemingly nothing other than quality staff and a slingshot, how can such small enterprises face off against their much larger adversaries, who often have huge teams of advisors advocating and negotiating on their behalf?  What they need is a level playing field.

The question is, how do they accomplish that?


As a physician you understand, as Ben Franklin admonished, that “an ounce of prevention is worth a pound of cure.”  For that reason, preparing for your upcoming negotiations is key to a favorable outcome.

In the previous issue of Salient Value, I discussed the five things you need to do right away if you are considering selling (or merging) your urgent care center.  Assessing your current situation, documenting your finances, understanding your operations, setting goals, and building a team of advisors are all necessary steps before starting a dialog.

Even if you have been practicing for a long time and already know what makes you and your center special, going through those important five steps will help you better articulate your strengths in ways that a buyer will appreciate.  The knowledge that you gain about yourself, your goals, and your clinic through this kind of preparation will serve as the foundation for any negotiations and will allow you to clearly understand what elements you bring to a future partnership.


Before you go to market, it helps to already be familiar with your “enemy”, which is how I facetiously refer to your future partner and buyer.  Who are they?  Why are they interested in buying urgent care centers in general and yours in particular?  What do they have to offer you besides price?  What, if any, limitations do they have to contend with?

The urgent care landscape has become so competitive that the answers to these questions are not as straightforward as they once were.  Today, the universe of buyers includes the following:

  • Large Urgent Care Centers or MSOs (Management Services Organizations)
  • Small groups of physicians
  • Hospital systems
  • Private equity groups and other so-called financial sponsors
  • Health insurance companies, such as United Healthcare and Anthem.

Each of these buyer types presents different opportunities and challenges to a prospective seller.  For example, private equity groups often do not have operating experience.  As a result, to appeal to such a group it helps to have a seasoned management team in place and, often, at least $1,000,000 in EBITDA (earnings before interest, taxes, depreciation, amortization).

Alternatively, if you fall under the increasing category of providers who have had it with the business side of medicine, you may be looking for a partner that can help you manage your operations.  Most of the above groups can help with this, including private equity groups interested in so-called add-on acquisitions, but to varying degrees and subject to different terms and conditions.


In my tenure as COO of a growing urgent care center, I was always amazed at the sometimes overwhelming number of items that owners have to negotiate on a daily basis.  One would think that this would make doctors great negotiators.  But when you couple the myriad details that a merger or acquisition entail with the level of emotion involved in “selling your baby”, you begin to understand just how the sale of your practice is different from any other type of negotiation you have ever undertaken.  Here's some specific advice:

Hire an M+A Advisor: Physicians typically avoid treating their own family members or themselves because they lack the objectivity required to make the best decisions.  The same is true with something as important as a major business negotiation. A mergers and acquisition advisor with healthcare experience can not only guide you through the sales process, but also sit alongside you at the negotiating table.  Similarly, a seasoned attorney and accountant can help guide you through the many legal, accounting, and tax considerations that you may need to negotiate.

Understand the Terms:  Sellers want to sell their practice for the highest price possible, but don’t overlook the importance of the terms of the deal. Be sure that you understand how much of your selling price will be received up front and how much will be subject to an earn out. With the help of your M+A advisor, you’ll better understand key issues, such as the following:

    • How much authority you will have post-close, assuming that you are part of the new enterprise?
    • What are the implications of a non-compete clause (if one is present)?
    • Can you unwind the transaction if you are not happy with your new partner, and if so, how would you do that?

Aim for Win-Win Situations:  If sellers are trying to get the highest price possible and buyers are looking to get the lowest price possible, how do deals ever get done?  The answer is that each party must recognize that in order to get something, they need to provide something in return.  What you are bringing to the table hopefully includes a well-run, profitable, and compliant practice with a solid and loyal base of patients, and given that value, you may feel you’re not getting enough from a transaction.  However, instead of clinging to a hard and fixed price, it might make more sense to understand the range of values that can be applied to practices with your particular set of demographics.

Get Multiple Offers, If Possible:  Practices often fail to recognize the importance of competition in the sales process.  A practice may be approached by the local hospital or a larger medical group, so they negotiate with them exclusively.  Despite the string of mergers that have taken place in the industry, the urgent care landscape continues to be fragmented.  In such an environment, sellers benefit from reaching out to a broad range of potential buyers. Ideally, you want the sale of your business to go into a "bidding war", where multiple buyers compete.

Earlier, I alluded to the timeless story of David and Goliath.  If you do a little digging you may discover that the story is far more than simply a classic underdog story.  It is, in some ways, about what can be achieved by those who are confident and prepared, no matter their size.

Luis de la Prida

Luis de la Prida MBA, CM&AA

Former Managing Director

Lou is a Certified Merger & Acquisition Advisor (CM&AA), consultant, and healthcare entrepreneur with over 25 years of successful experience advising middle market businesses and Fortune 500 companies.  As a former Chief Operating Officer of a medical practice, he presided over a multi-million operating budget and acquisition efforts, while transforming it into a multi-specialty medical group focused on primary care, urgent care, cardiology, neurology, and home care.

His diverse career includes nearly a decade on Wall Street, where he gained valuable international experience in financial roles at J.P. Morgan and Credit Suisse First Boston.  Lou's professional memberships include the Alliance of Merger & Acquisition Advisors (AM&AA) and the Healthcare Financial Management Association (HFMA).

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