The Battle for Food Convenience

Today’s food and beverage landscape demands convenience, expediency, and cost-efficiency, each of which seems to constantly inspire new technologies, innovative brands, and exciting trends.  In the ongoing battle for food convenience, two trends currently rise to the top: (i) grocerants and (ii) meal-kit delivery services.    First, a grocerant (a phrase which, not surprisingly, combines the words “grocery” and “restaurant”) is a supermarket that sells prepared meals to consume onsite or take home.  They are an extension of what’s known in the grocery circle as a service deli, the manned counters offering build-your-own sandwiches, salads, pastas, baked goods, and rotisserie chickens.  Grocerants take the service deli concept to the next level by providing sit-down service and full bars. They are identified as a freestanding restaurant that is either adjacent to or within the supermarket.  For many, Whole Foods serves as an appropriate paradigm for the term grocerant, where oftentimes you will see people who come to Whole Foods solely to dine in, sans shopping lists and carts.  This is not to be confused with the Whole Foods’ locations that offer salad bars, hot food, and casual dining spaces, a concept that has been core to Whole Foods for many years.  According to the NPD Group, in-store dining and take-out of prepared foods from U.S. grocerants has grown nearly 30% since 2008, and accounted for 2.4 billion new visits and over $10 billion in consumer spending in 2016.

So what is the root cause for the uptick in grocerant activity?  While the concept of blending a restaurant with a grocery store has been around for a while, the changing perspective and tastes of Millennials have served as a catalyst pushing supermarkets to make stores feel like a food destination rather than simply a traditional grocery store.  Fifty years ago, baby boomers purchased foods from grocery stores compared to today’s landscape where grocers are competing with smartphone app food delivery concepts (e.g., Postmates, UberEATS, Good Eggs, and Caviar), farmers markets, and other options.  In a world where convenience seemingly holds more weight than ever before, grocerants offer the one-stop-shop solution for consumers who are motivated by a busy schedule while still adhering to the health-minded consumer of today’s society.

To keep up, grocers have been forced to adapt to these changing market conditions and consumer preferences, many of whom have gone beyond implementation of the grocerant concept and looked to the ready-to-cook market, which has seen its share of headaches.  Blue Apron, for example, the popular meal-kit delivery service known by many in the U.S., went public in June, but has since seen its stock decline and has also laid off 300+ employees, driven largely by the Amazon-Whole Foods merger, which was announced at the time of Blue Apron’s IPO.  However, there are signs that grocers still like what they see from meal-kit delivery outlets despite an aura of fatigue in the market. Plated, a U.S. meal-kit company, was acquired in September by Albertsons for approximately $200 million.  This gives Albertsons, which owns the Safeway chain with approximately 2,000 store locations across the country, a new way to increase revenue and reach new food buyers.   Other grocers have also taken to meal-kits, including Kroger, which launched Prep+Pared, and Canadian grocer Metro, which acquired Miss Fresh in August.  Additionally, other big food companies have shown interest in the meal-kit space in 2017, including Campbell’s Soup, which invested $10 million in Chef’d, Unilever, which led a $9 million round in Sun Basket, and Nestle, which acquired a minority interest in Freshly.

Between grocerants and meal-kits, grocers and big food companies are being forced to look for ways to diversify their experiences for customers.  Convenience, more than ever, seems to be key in the battle for market share in the constantly evolving food and beverage landscape.

The New Normal: Digital Disruption in the Classroom

Gone are the days of dusty chalkboards, mechanical pencil sharpeners and black Mead composition notebooks. In fact, the modern classroom is no longer just limited to SMART boards and projectors. Personal tablets, interactive LCD screens and Chromebooks – just to name a few – are all products on the rise in the 21st century classroom.

The statistics say it all: 76% of teachers believe digital content will replace traditional textbooks within the next 10 years, and 86% of students say they use the internet for schoolwork while at school. Digitalization is undoubtedly revitalizing the classroom and enhancing the learning experience not only for students, but also for teachers.

So, what’s driving digital disruption in the classroom and why are schools and teachers ok with it?

  • Personalized Learning Experience
    Learning is not one-size-fits-all. With technology, students can learn at their own pace through platforms that best fit their learning style. This has paved the way for one-to-one learning devices, with students using individual tablets or Chromebooks to access work and customizable learning content.
  • Accessibility
    Digitalization allows students to learn and teachers to instruct anytime, anywhere. Learning is no longer confined to the six-hour school day, nor restricted to the lecture hall and library. With technology, students can stream videos online, work on assignments and interact with teachers remotely, wherever they happen to be. Furthermore, students and teachers have access to instant information and are not limited by what is available in a textbook. They are able to research on the spot, with access to the most up-to-date news and information.
  • Student Engagement
    Hands on, interactive learning is a proven approach to boosting student performance, and technology has made this easier than ever before. Through videos, apps or games, there are many tools that make learning fun and interactive for students. Technology also fosters group learning environments, with students working together to solve problems on interactive screens or iPads.

It’s misleading to assume digitalization is not without some real disruptions – technology can be distracting and expensive, no doubt. However, the end result is a classroom environment that is student centric and collaborative. With technology in the classroom, the teacher becomes a guide and coach, instead of a lecturer at the front of the room.

This marks only the beginning of digitalization in the classroom. Some schools are already exploring other emerging technologies, such as taking virtual field trips to Easter Island via AR/VR or learning about geometry via 3D printers. The possibilities are endless.
Either way, one thing is certain – digitalization is one disruption that students, teachers and parents can all get behind.

Is It Time to Sell Your Practice? A Continuation from Last Week’s “Health Matters” Blog

With these essential questions answered (see last week’s blog for more detail):

  1. What is your Career Path?
  2. What Objectives Matter Most to you in a Sale?
  3. What is Your Process Execution Timing?
  4. How Might Other Partners or Providers View a Sale?

below are crucial next steps in realizing the goals for the next phase of your practice.

Begin to assemble key data for your practice.  Throughout the sale of your practice, you’ll be called upon to share key data with prospective buyers.  Starting early can pay large dividends in terms of process delays and can protect value by preemptively dismissing buyer concerns, which may otherwise impact their views on the value they would ascribe to your practice.  The following data checklist is by no means exhaustive, but is a good place to get started.

Financial Data

  1. The last three years of profit and loss statements for your business. For practices that record their financials on a cash basis, we highly recommend working with a reputable accounting firm to restate your financials on an accrual basis.  Please see more details below clarifying the role that accountants can play in a sale process.
  2. Your most recent balance sheet.
  3. A summary of your current receivables.

Practice Data

  1. A summary of collections by procedure type, provider and location (if you have more than one office in your practice).
  2. A breakdown of your collections by commercial payors and government payors.
  3. An overview of the people and systems employed (e.g., Centricity).

Other “Nice to Haves”

  1. A one-page summary of your practice, including your philosophy on patient care, marketing approach and referral patterns, and any potential acquisition targets or growth opportunities for your group (de novo locations, new procedures, etc.).

Engage the right help at the right time.  Selling your practice can be a daunting proposition.  Thoughtful engagement of sell-side advisors, both financial and legal, can remove a significant amount of burden for you, speed the time to close, and drive great outcomes for you and your group (both monetary, and in the form of new opportunities / expanded roles with the buyer of the practice).

Accountants – Accountants can help in a number of ways, including ensuring the financials for your practice will withstand buyer scrutiny.  Most commonly, accountants are engaged prior to marketing your company to perform what is referred to as a Quality of Earnings or “Q of E.”  Click to see our recent blog post for detailed information on Q of Es.

Financial/Transaction Advisors – Financial/transaction advisors, such as MHT Partners, will guide you throughout the sale/partnership process.  Initially, financial advisors will spend significant time with you learning more about your business, its growth opportunities, and your desired objectives in a transaction.  With this knowledge in hand, a financial advisor will work with you and your accountant to prepare detailed financials and projections for your business, and craft an in-depth set of materials, often referred to as “the book” or confidential information memorandum the “CIM.”  These materials will be written to convey the highlights of your business and position it as favorably as possible.  Early assembly of key data can rapidly expedite the creation of these materials.  In parallel, the financial advisor will work with you to assemble a list of prospective buyers that align with your unique culture and objectives for the transaction.  Once complete, the financial advisor will contact buyers and solicit offers for your business.

Legal Advisors – Legal advisors will help to structure the purchase agreement for your practice as well as many other related documents required for a sale or partnership.  The importance of selecting a law firm with extensive healthcare and M&A transaction experience can hardly be overstated.  Firms with appropriate experience can push a sale process along and ensure that favorable terms are reached.  Without this specific experience, processes can stall.

We’re here to help.  Selling specialty physician practices is a large part of our healthcare practice.  As a firm we’ve been extraordinarily active in the market, recently completing anesthesiology, dermatology, hospitalist and emergency physician deals.  We would love to be a resource for you as you consider a potential transaction for your practice.


Leveraging Data to Secure a Vibrant Future

The proliferation of the internet and smartphones in modern society has driven entrepreneurs to seek new ways to leverage data to profitably change consumer behavior. Companies are finding that their ability to collect, analyze and develop insights from consumer data can lead to sustainable competitive advantages. These competitive advantages are presenting themselves in a variety of ways, including vast improvements in a company’s products and services. These improvements can often drive powerful network effects, in which companies are able to attract more customers and in turn generate more data.

In addition to collecting and analyzing significantly more data during normal operations, entrepreneurs are reshaping corporate strategy to embrace data and technology and allocating resources to capitalize on the data its products and services create. This entails strategic workforce planning centered around hiring top talent with digital skills.

This “Big Data” movement is no longer just for big companies, it is also serving as a compelling tool for innovation across a variety of niche industries. Additionally, entrepreneurs are deriving benefits from improved decision making and increased organizational efficiencies, a dynamic that can serve as a significant barrier-to-entry. This dynamic is a powerful motivator for entrepreneurs to adopt a data-first mindset, as many long-standing industries are being disrupted by new technology at a furious pace.

MHT Partners believes the search for robust and valuable data sources will continue to drive M&A activity for the foreseeable future. As a result, those companies with well-developed data strategies will command higher valuation multiples.

House and Senate Reconciliation on Tax Reform?

Given the turbulent year Congress has experienced to date, it’s anyone’s guess as to where the House and Senate will come to an agreement on a reconciliation bill regarding tax reform.  However, if tax reform passes this year, the impact will be significant on both the business community and individuals.

While most observers are focused on the possibility of a significant reduction of the corporate tax rate to 20 (or 22)%, other provisions in the proposed tax bill will impact businesses in a meaningful way.  The owners of “pass-through” entities (LLCs and S Corps) would see significant reduction in their taxable income.  With those pass-through earnings currently taxed at ordinary income, proposed revisions would allow an approximate 23% deduction to “qualified pass-through business income” that would lower the effective personal rate to 27% to 29%.   However, service companies (e.g., law, accounting, investment, firms) would not be able to utilize this deduction.   The deduction would also be limited to 50% of W2 earnings for these taxpayers.

While corporations would benefit from lowering the current corporate tax rate to 20% or 22%, various deductions would be eliminated as a trade off for the reduction. Chief among these would be restrictions on the amount of interest expense business owners could deduct.   Essentially, the expectation is that interest expense deductibility would be limited to 30% of EBITDA.   However, non-deductible interest expense would be allowed as an expense carryforward.   For instance, for PE buyers of assets who utilize high levels of leverage and exceed the 30% cap, this carryforward feature might allow for the deductibility of interest expense on highly levered businesses as they de-lever during the hold period.

Finally, after over a decade of discussion, it appears the House and Senate are in agreement on new rules concerning General Partner (“GP”) compensation for Private Equity and Hedge Funds.  While a number of the details are still uncertain, it appears Congress’ intent is to require GP’s pay ordinary income on any GP earnings for holdings of less than three years.   Investments held longer than three years would still qualify for capital gains tax treatment.

There are meaningful changes in the proposed bill for tax rules regarding Executive Compensation but those details have not been agreed upon.   It is expected that there will be limitations on certain deductions for “excess” Executive Compensation.    Personal tax rates would also generally be reduced for the majority of tax payers along with restrictions on certain deductions such as mortgage interest and state and local taxes.

While the bill’s passage isn’t guaranteed, political observers expect passage given Republicans’ strong desire to pass at least one major piece of legislation this year.

Key Questions to Consider Before Marketing a SaaS Business

The investment environment remains favorable for software as a service (“SaaS”) companies, leading many shareholders to consider raising capital, selling or recapitalizing (collectively, a “Transaction”) their business. There are many factors involved when deciding to pursue a Transaction. Despite the complexity, shareholders need to consider three critical questions before embarking on a Transaction.

How well can you present (and defend) the metrics or Key Performance Indicators (“KPIs”)?

It’s time to prepare your SaaS alphabet soup (LTV, CAC, ARPA, MRR, ARR and NER), and add a touch of the Rule of 40, Bookings, Billings, and Churn. SaaS KPIs will be in full display in any Transaction, and as a result shareholders will need to know these metrics inside and out. Potential investors will investigate SaaS metrics very carefully, with a specific focus on how each KPI is defined, and how it has trended over time.

Shareholders will have to present and defend these metrics exceptionally well if they want to achieve a premium valuation. If metrics have trended well, explain the factors that will continue the momentum. If metrics have deteriorated, be ready to explain what happened and what will enable a turnaround. If the latter has happened, proactively addressing any softness in these metrics allows the shareholders to “control the message.”

How satisfied are the employees?

It’s challenging to hire and retain top talent, and investors in SaaS businesses know this all too well. Investors are increasingly paying attention to employee sentiment, turnover and company culture. Employee review sites like Glassdoor make it even easier to gauge satisfaction. If potential investors see overwhelmingly negative sentiment, they may try to negotiate a lower valuation or, even worse, pass on the opportunity entirely.

Shareholders should empower and incentivize their management teams to foster a culture where employee satisfaction is closely managed. Measures of strong employee sentiment should be highlighted to potential investors, and any shortfalls should be proactively addressed.

Does the management team plan to stick around?

When control of a business changes hands, some management team members may want to leave and others may want to stay. It’s essential for shareholders to assess each senior manager’s commitment to the company post-deal. Having high-performing management teams commit to stay, preferably with equity remaining in the business, is often viewed by potential buyers as a significant plus.


Planning can go a long way, and the same can be said for a SaaS Transaction. Proactively addressing metrics presentation, employee sentiment, and management team retention will go a long way towards ensuring a smooth Transaction.

Hunting on the Upswing

“If it’s brown, it’s down!” used to carry a fairly “Hatfield and McCoy” / “Jed Clampett” feel, and growing up in Northern New England, the sight of a whitetail deer in the back of a pickup was a pretty common scene come November. Having lived in large, coastal cities for the past couple of decades, I’ve not witnessed much of that, but a closer look at the sport and hunting industry reveals a vibrant arena. The U.S. hunting industry grew from $23.3 billion in 2012 to approximately $27.4 billion in 2017.

Driving this growth are a couple of dynamics:

  1. Female hunters – while perhaps not the image that first comes to mind when picturing someone clad in bright orange wool and traipsing through the woods, the population of female hunters grew a remarkable 83% for the last ten or so years.
  2. Millennials desire to be outdoors, to live healthy and balanced lives, and to consume whole foods where they understand the origin (“clean label”). These objectives have resulted in growth in what is now America’s largest, and increasingly, most influential cohort, with eight of ten “echo boomers” now expressing desire to participate.

Private equity has taken notice as well, with numerous investments having transpired over the recent past. In addition, several large holding company participants are eager and aggressive to acquire innovative, authentic brands in the hunting accessories space.

So the next time your friendly neighbor offers to bring you a homecooked meal, you may find yourself picking buckshot out of your teeth by virtue of an incredibly simplified supply chain!

Is It Time to Sell Your Practice?

Deciding to sell your practice is one of the largest financial and personal decisions you’re likely to undertake. Despite the highly personal (and slightly scary) decision to consider alternatives for your practice, there are numerous advantages to selling all or a portion of it. Specifically, a sale or partnership can allow you to monetize the years of investment that you’ve made in your practice, plan for succession, create room in your partnership structure for younger physicians, or partner with a larger group that can help to drive growth and provide additional back office support – allowing you to focus on your patients.

Whatever the reason you choose to explore a transaction, there are steps you can take early on in preparation for a sale or partnership in order to maximize value, options and opportunities both for you as an owner or partner and for your staff providers and employees.
Define your short and long-term goals, personally, professionally, and financially, for your practice. As you frame your thoughts, here are some important questions to think through:

  1. What is your Career Path: Do you want to practice medicine for a few more years . . . five to ten more years . . . exit as quickly as possible? This decision could influence the partner or buyer selection. The longer you intend to practice, the more opportunities will open up for you. Remember – at the end of the day – you’re selling a “people” business, and what has made your business successful and attractive in the past is the people – namely ¬you. Most groups will want a transition period with providers selling their practice and will want to have incentives in place that keep remaining providers happy and focused on providing high-quality patient care.
  2. What Objectives Matter Most to you in a Sale: Are you interested in maximizing the dollar amount for your practice? Finding the best cultural fit for your providers? Creating a legacy? Maintaining continuity of care in your community? Becoming a platform, which acquires other local / regional provider groups? Here too, the answers to these questions will influence the possible universe of buyers / partners with interest in your practice and how they value your practice.
  3. What is Your Process Execution Timing: Are you ready to go now? Are you more interested in pursuing a leisurely exploration of alternatives?
  4. How Might Other Partners or Providers View a Sale: Is this the right time for the practice to find a new partner? Are there emerging physicians that could be made a partner in the context of a sale? Will providers want to stay with the practice if it has a different ownership structure?

With these essential questions answered, look for next week’s blog explaining crucial next steps in realizing the goals for the next phase of your practice.

Going Beyond the Scores . . . a Continuation from Last Week’s “Learning Curves” Post

While it was once typical for American students to matriculate into college only after earning their high school diploma, students nowadays receive their first taste of university as early as their freshman year of high school. Duel Enrollment (“DE”) programs allow students to take college-level courses that can generate both high school and college credits. DE programs have seen a significant bump in popularity since the early 2000s (67% growth from 2002 to nearly 1.4 million students in 2010), as students’ awareness of the potential cost savings and desire to add rigor to their standard high school studies grows(1).

DE programs are different from Advanced Placement (“AP”) coursework in that courses can be taken outside of the high school classroom, often on a local college campus or even online. Concurrent enrollment is another option, in which courses are taught by college-approved high school teachers in a high school setting. Additionally, DE students are awarded a course grade as opposed to an exam score.

Like AP students, studies have shown that DE students are more likely than nonparticipants to graduate high school, enroll in college, and earn college degrees(1). For example, high school students who participate in DE at a four-year college or university are estimated to have four-year college enrollment rates that are 8.1%-15.3% higher than their nonparticipant peers (2):

Several qualitative advantages further differentiate DE programs from standard high school academics as well as other academically rigorous high school activities. DE programs:

  1.  Introduce high school students to the rigorous work load that comes with college coursework
  2. Provide the potential to earn transferable credits for both high school and college course requirements, which can be worth thousands of dollars in future course savings with the ability to graduate early
  3. Help students gauge academic interest in order to avoid costly changes in major while at college
  4. Expose students to subjects directly applicable to a desired future major or technical skill
  5. Ease the transition from high school to college
  6. Provide an alternative to AP courses
  7. Are structured based on grades and credits earned on a continual basis, as opposed to being determined by one final exam as is the case with AP courses
  8. Promote four-year degrees to students at an earlier, impressionable age

While DE programs can certainly be beneficial, they are not without risk or pitfalls. As students decide whether or not to enroll in such coursework, there are several points for consideration:

  1. Students must ensure the course is still challenging. For example, an introduction course at a community college may not be as rigorous as a high school AP course
  2. Transferability of credits to college depends on individual university or college policy
  3. Fully capitalizing on DE programs means that high school students must be mindful of how their high school course work can contribute to their future degree
  4. DE program availability varies by region and space in such classes can be limited
  5. While some DE programs are free, some come with a price tag that may be too hefty even if it is cheaper than typical tuition

As the cost of college increases and admissions competition rises, high school students find themselves in a challenging position when it comes to deciding on post-secondary education. With programs like AP and DE, students gain exposure to college at an earlier age, enhance potential to cut future college costs, and are more likely to be successful in college.

(1) Community College Research Center; National Student Clearinghouse Research Center: “What Happens to Students Who Take Community College “Dual Enrollment” Courses in High School?”
(2) College Board Research Reports: “A Comparison of the College Outcomes of AP and Dual Enrollment Students”