At the 20th Annual Ambulatory Surgery Centers Conference in Chicago on Oct. 25, a panel including Scott Becker, JD, CPA, partner at McGuireWoods and publisher of Becker's ASC Review, Amber Walsh, partner at McGuireWoods, and Jon Vick, founder and president of ASCs Inc., discussed what ASC owners should consider when thinking about a selling a center.
To start, Mr. Vick says owners need to ask themselves one question when they first start thinking about a sale: Can someone else help run the center better than we're running it ourselves? "Almost without question, sellers are trying to find out what a company can do better," he said. If the answer to the question is yes, it is time to start looking for a potential buyer.
According to Mr. Vick, there are about 30 companies interested in investing in ASCs, and they fall into three categories: new and unproven, not great at increasing earnings and very effective at increasing earnings. "Ask for track records," he said, to make sure the center goes into the right hands. He also noted that hospitals tend to offer less than a management company, so he recommended getting purchase proposals from management companies first.
The next step in considering a sale, particularly for physician ASC owners, is to determine what the ASC is worth to them in terms of net worth as part of their investment portfolio. "The more you've grown your other investments, the less pressure you have," Mr. Becker said.
Physician sellers need to also consider non-compete clauses that often come along with an ASC sale. "It will roll into the decision tree as to whether or not to sell," Ms. Walsh said. "Non-competes in the surgery center industry are heavily negotiated and thought about…It's a tool for the buyer to get comfort and strength." Ms. Walsh said sellers need to consider following three main aspects of a non-compete clause.
• The scope of activity being prohibited.
• The geographic scope. This varies based on location — for instance, in rural Wyoming, the range could be 75 miles, which would not work in downtown Manhattan, Ms. Walsh explained.
• The duration of the non-compete.
Finally, sellers should do some seller-side diligence during the process of a sale. "It's always very smart, so you know what you would like to potentially correct before the next stage," Ms. Walsh said. Additionally, she recommended spending a lot of time on the letter of intent. "The longer you spend on the LOI, the more detail you get," she explained. "You could find yourself facing 'deal fatigue' but it helps you get out there and address the biggest pressure point issues."
To start, Mr. Vick says owners need to ask themselves one question when they first start thinking about a sale: Can someone else help run the center better than we're running it ourselves? "Almost without question, sellers are trying to find out what a company can do better," he said. If the answer to the question is yes, it is time to start looking for a potential buyer.
According to Mr. Vick, there are about 30 companies interested in investing in ASCs, and they fall into three categories: new and unproven, not great at increasing earnings and very effective at increasing earnings. "Ask for track records," he said, to make sure the center goes into the right hands. He also noted that hospitals tend to offer less than a management company, so he recommended getting purchase proposals from management companies first.
The next step in considering a sale, particularly for physician ASC owners, is to determine what the ASC is worth to them in terms of net worth as part of their investment portfolio. "The more you've grown your other investments, the less pressure you have," Mr. Becker said.
Physician sellers need to also consider non-compete clauses that often come along with an ASC sale. "It will roll into the decision tree as to whether or not to sell," Ms. Walsh said. "Non-competes in the surgery center industry are heavily negotiated and thought about…It's a tool for the buyer to get comfort and strength." Ms. Walsh said sellers need to consider following three main aspects of a non-compete clause.
• The scope of activity being prohibited.
• The geographic scope. This varies based on location — for instance, in rural Wyoming, the range could be 75 miles, which would not work in downtown Manhattan, Ms. Walsh explained.
• The duration of the non-compete.
Finally, sellers should do some seller-side diligence during the process of a sale. "It's always very smart, so you know what you would like to potentially correct before the next stage," Ms. Walsh said. Additionally, she recommended spending a lot of time on the letter of intent. "The longer you spend on the LOI, the more detail you get," she explained. "You could find yourself facing 'deal fatigue' but it helps you get out there and address the biggest pressure point issues."