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December 14, 2017

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

MHT Partners  | Healthcare Investment Bank

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.

 

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