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Running a smooth sale: Tips for sellers in a health care transaction


The health care and life sciences industries are in a period of dramatic change. Despite this change, successful private equity funds and strategic buyers can still execute deals. McGuireWoods and RSM host an annual conference to explore ways to successfully close transactions and achieve capital growth by implementing the right strategies in the right markets. The following article summarizes one of the panel discussions at the 2018 event.


  • Bill Spizman, Partner, RSM US LLP
  • Brian Doyle, Managing Director, William Blair
  • Steve Reynolds, Principal, Trivest
  • Michael Ory, Managing Director, Health Care Services, Raymond James Investment Banking

Consistently growing and providing investors with impressive returns, the health care industry has yet to experience a bust. In this expanding industry, the mentality tends to be one of “use it or lose it,” according to Brian Doyle, managing director at William Blair. “The combination of strategic buyers and financial sponsors with record levels of cash has created a great dynamic for sellers,” he said. “It all comes down to when companies are coming to market.”

In 2017, there was a rush by private equity (PE) owners to get companies to market in anticipation of a market downturn. Today, however, mergers and acquisitions (M&A) are seeing another strong year, much of which is attributed to financial sponsors and PE sitting on a huge amount of dry powder. “Despite the abundance of cash at hand, from a seller’s perspective it can be tough because of such strong valuations,” said Doyle. “However, strategic buyers are flush with cash, and that benefits our clients."

Today’s market conditions and opportunities for growth

Strategic buyers are pursuing growth in different ways, and it’s a much more competitive environment. According to Michael Ory, managing director of health care services at Raymond James Investment Banking, “They are more market-focused, and in addition to horizontal consolidation, strategics are more frequently exploring vertical consolidation.”

A tip offered by Ory was for a seller to think about where a business fits among its competitors, or other strategic market participants who would view the business as an extension. “A seller should ask, ‘Could my business be a true hub acquisition for a strategic buyer that might command a premium?’ Or does it look like a tuck-in business where synergies become the primary consideration?”

Understanding that information in advance can set a company up for a more efficient sales process.

Getting ready for the sale

When RSM’s Spizman asked about how this seller’s market impacts PE’s decision-making, Steve Reynolds, a principal at Trivest, answered that sellers need to keep track of different metrics that help define what the business does and whether there is growth. “PE firms love data,” he explained. “Great financials and a great founder story are not enough. Benchmarking progress builds confidence in a buyer and shows that the company is built on more than just intuition.”

Specifically, creating a sell-side quality-of-earnings (QOE) report captures the historical snapshot of a company, providing a buyer with a multidimensional view of the pros and cons of a business. Michael Ory of Raymond James noted, “Validating a story with third-party accounting and other reports can help to catalyze interest.” Reynolds added that even if you don’t do an audit, “It’s a good idea to go and find a reputable accounting firm and have them do some type of review of your numbers. Whether that becomes a QOE report or something similar, you can at least show someone a set of financials that provides buyers confidence when putting together an offer for a company.” Many founder- and family-owned businesses have never been audited, and often much of what goes on in the business still revolves around practices established by the founder. Businesses who streamline their accounting processes give themselves an edge in front of prospective buyers.

Reynolds also noted that it’s just as important to gather qualitative data as quantitative when preparing for a sale. “Today,” he said, “we use net promoter scores on almost every deal we do. Net promoter scores create intangible data on a company, such as ‘Do people like your products and services better than your competition, and are they more likely to recommend you to others?’”

“Like I said,” he concluded, “PE firms are obsessed with data, and brand loyalty is yet another data point that speaks to a company’s value.”

Key investment trends in health care

While it’s a seller’s market and the health care industry is thriving, certain sectors are pacing ahead of the pack and especially attractive for buyers. “One long-term popular area are office-based specialty practices—dermatology, ophthalmology, podiatry and fertility,” said Ory. “Veterinary and animal health sectors are also growing. We’re seeing enthusiasm on the part of investors to go in and do the work to set these practices up as platforms for growth and to bring in ancillary services,” he added.

While more and more businesses are preparing detailed financial reports as a standard offering to potential buyers, not every business prepares a forecast or a succession plan. Having a detailed business plan, one to be followed after the CEO leaves, demonstrates stability to investment bankers and prospective buyers. William Blair’s, Doyle added, “A great business is created because of vision, but also because of the people who helped build it. Often we’ll have conversations with founder businesses and ask them, ‘Well, how long are you willing to stick around for?’ And the answer is, ‘Well, maybe a couple of months.’ We respond with, “Well, the value of your business is not going to be as much as you think, unless you want to stick around for the next chapter.’” Having a team stay in place through the first two to three years is critical to a successful transition, the panel jointly agreed.


To learn more about the McGuireWoods and RSM US Annual Health Care and Life Sciences Private Equity and Finance Conference, please visit the conference website.

For more health care and life sciences industry insights, read RSM’s quarterly industry spotlights developed in partnership with Pitchbook.



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