Practices often start thinking about selling when they lack capital or see volume decrease as the current ownership group ages, according to ECG Management Consultants Partner Sean Hartzell. However, it's important to know what triggers investor interest and whether the practice is ready.
Panelists shared their insights on how ASCs and specialty practices can approach mergers and acquisitions at Becker's 16th Annual Future of Spine + The Spine, Orthopedic and Pain Management-Driven ASC Conference June 15 in Chicago.
The panel was moderated by McGuireWoods Partner Holly Buckley, JD, and included Mr. Hartzell; Merritt Healthcare Partner Matthew Searles; Provident Healthcare Partners Associate Robert Aprill; and McGuireWoods Partner Geoffrey Cockrell, JD.
Now is an optimal time to look into selling, according to Mr. Aprill.
"Knowing what the multiples are now and seeing the forward-looking reimbursement environment facing a lot of our clients in the musculoskeletal space … it's probably better to do something now as opposed to waiting and facing the unknowns of multiples and reimbursement," he said.
With several types of transactions and buyers to consider, practices could benefit from hiring an investment banker to explore the many options and help educate shareholders.
"You can do it on your own, but do you really want to go through a transaction [worth thousands or millions of dollars] for the very first time and learn that process and interact with buyers and their investment bankers?" Mr. Searles said. "You put yourself at an immediate disadvantage."
To establish a platform financial investors would back, practices should have a steep growth curve and make sure financials are in order, according to Mr. Cockrell.
"Spend more money on financial reporting. The absence of [audited financials] is an impediment in every deal," Mr. Cockrell said.
Scale typically results in a higher valuation, according to Mr. Aprill. Buyers will evaluate whether an orthopedic practice has a built-out physical therapy suite, sophisticated DME, spread-out ancillaries and a solid management team.
Prime investment targets also have a growing physician base, a functioning revenue cycle and decreasing variation in inputs and outputs, according to Mr. Hartzell.
"Those are all good things that either a strategic buyer or a financial buyer's going to want to look at. The last thing you want to do is always come in and fix everything," he said.
It's important to remember investments are made for a return, Mr. Searles said.
"We don't want to get caught flat-footed on any issue," Mr. Searles said. "A lot of the talk you hear is about strategic issues, but certainly legal and regulatory [are important, too]. All the unsexy stuff you have to look at, I can guarantee you a buyer will look at."