Here are 5 tips from Blayne Rush, president of Ambulatory Alliances, for preparing to sell an ASC:
1. Make sure you fall within a certain net income bracket. In order to become attractive to national buyers, a surgery center should have a net income of between $1 million and $1.5 million, said Mr. Rush. "Sustainable earnings are important," he said. "That's when you start to see potential for higher-level pricing of the surgery center."
2. Add cases to increase multiples. Adding cases and earning additional revenue before going to market can significantly benefit the center's multiple, said Mr. Rush. "One of the biggest things that we'll do [at Ambulatory Alliances] is go in and help surgery centers recruit the last remaining few cases," he said. "You let those cases season, then go to market. It adds a substantial amount of profit to the bottom line, and you can get double-digit multiples."
3. Know your goals. Be clear on what you want to get out of the sale, as well as what your potential buyers will be looking for. "You need to do homework and prepare your center for sale," Mr. Rush said. "Preparation organization of your center will show the buyers you are educated and informed. Then you'll be in a better position to be able to convey the historical and the future story of the center. Not doing that will increase the likelihood that the entire story and potential of the center will not be known to the buyers."
4. Show the center is transparent. From an investment standpoint, physicians are looking for operational transparency. "How transparently is the center operated?" Mr. Rush said. "Do physicians get to see the books? Are they involved in the decision-making process of what equipment to buy, how to divvy up the block time or what days the center is open? Where is the money coming from, and where is it going? Who owns what percentage of the surgery center?"
5. Get debt under control. If the surgery center's debt is higher than its tangible assets, then the center is in a negative state. "If you aren't making a profit, the center's tangible assets are worth less than their debt then the center is not worth much," he said. "Depending on who comes to the table as an investor — whether it is an individual doctor, group of doctors or a management company — and depending on the value of the intangible assets that the new investors bring to the table — such as their ability to recruit new physicians, their reputation and ability to manage people and expenses — I would argue that you should be open to paying them in a management agreement."
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1. Make sure you fall within a certain net income bracket. In order to become attractive to national buyers, a surgery center should have a net income of between $1 million and $1.5 million, said Mr. Rush. "Sustainable earnings are important," he said. "That's when you start to see potential for higher-level pricing of the surgery center."
2. Add cases to increase multiples. Adding cases and earning additional revenue before going to market can significantly benefit the center's multiple, said Mr. Rush. "One of the biggest things that we'll do [at Ambulatory Alliances] is go in and help surgery centers recruit the last remaining few cases," he said. "You let those cases season, then go to market. It adds a substantial amount of profit to the bottom line, and you can get double-digit multiples."
3. Know your goals. Be clear on what you want to get out of the sale, as well as what your potential buyers will be looking for. "You need to do homework and prepare your center for sale," Mr. Rush said. "Preparation organization of your center will show the buyers you are educated and informed. Then you'll be in a better position to be able to convey the historical and the future story of the center. Not doing that will increase the likelihood that the entire story and potential of the center will not be known to the buyers."
4. Show the center is transparent. From an investment standpoint, physicians are looking for operational transparency. "How transparently is the center operated?" Mr. Rush said. "Do physicians get to see the books? Are they involved in the decision-making process of what equipment to buy, how to divvy up the block time or what days the center is open? Where is the money coming from, and where is it going? Who owns what percentage of the surgery center?"
5. Get debt under control. If the surgery center's debt is higher than its tangible assets, then the center is in a negative state. "If you aren't making a profit, the center's tangible assets are worth less than their debt then the center is not worth much," he said. "Depending on who comes to the table as an investor — whether it is an individual doctor, group of doctors or a management company — and depending on the value of the intangible assets that the new investors bring to the table — such as their ability to recruit new physicians, their reputation and ability to manage people and expenses — I would argue that you should be open to paying them in a management agreement."
More Articles on Transactions and Valuations:
30 Physicians Partner With Tallahassee Memorial Healthcare on Joint Venture Surgery Center
ASC Roundtable: Outlook for Investment and M&A Activity in the ASC Sector
Ohio's The Urology Group Opens New $20M Headquarters, Surgery Center