By Tom Schramski, PhD, CM&AA
Volume 2 Issue 24, November 24, 2015
Recently, the owner of a healthcare business we represent called me with a plea to assist an interested buyer. “I really like his company and it seems like a great fit,” he noted, “but he just can’t produce an offer in writing.” After briefly speaking with the buyer about any concerns, he said, “It’s not about the money; it’s just the feeling that we’re committed and there’s no going back.” When I told him he could build in good reasons to opt out after a signed LOI, he responded, “That’s the best way I can explain it,” and disappeared.
This is a very frustrating encounter many sellers encounter, pointing to the complex thought processes and emotions involved in each transaction.
We all know the objective reasons why potential buyers of any product or service, let alone a multi-million dollar healthcare company, might walk away from a profitable opportunity without making a specific offer: inadequate capital and/or financing; a poor understanding of the relevant market dynamics; a bad cultural match; a lack of operational synergy; and so on.
But why would a qualified buyer refuse to tender an LOI when the deal has clear strategic value and not one of the above reasons is relevant?
Here are some experience-based thoughts:
Sellers and buyers in the healthcare marketplace have distinct realities that must be appreciated and anticipated. Sellers agonize over selling their “baby” and financial planning, while buyers fret over future value and how to mitigate risk. Yet when things work right, both experience that sometimes scary, but wonderfully transcendent moment when they both say “yes” and the deal closes.
Transactions may fall apart for reasons that can’t be fully explained, but as Sir Richard Branson noted, “Business opportunities are like buses; there is always another one coming.”
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.