The Value of Using a Merger & Acquisition Intermediary
Selling a home care, hospice, private duty or behavioral health agency is more complex than selling other types of small to mid-size businesses. While a general business broker may work with a variety of businesses, a professional M&A intermediary can deliver a more qualified buyer, a smoother transition and a higher sale price.
First Things First
First, the selling price of a healthcare business is based on more than just straight street value or a basic valuation that would be offered by a general business broker. An intermediary will use multiples of EBITDA (earnings before interest, taxes, depreciation and amortization), as well as, adjustments for owner add-backs.
Second, a complete market analysis and well-thought pre-planning strategy are vital to get the business in front of the right buyers at the right price. A simple ad promoted across general selling networks isn’t going to attract the best purchasers.
Lastly, a confidential presentation of the business is crucial to maintain employee confidence and to control business reputation. Pre-mature knowledge of a business’ sale can jeopardize these and may ultimately hinder a sale.
Due to the complexity and ever-evolving regulations, the selling process for a healthcare agency can also be quite lengthier. Intermediaries commit to fewer deals at a time than a general business broker, allowing for the time and attention required in these multifaceted transactions.
An experienced intermediary who knows the market will present the business properly and confidentially to a broad spectrum of targeted, qualified buyers. A general business broker unfamiliar to the industry may consistently call upon and rely on the business owner to help with details throughout the sales process.
“An intermediary will take over the complex task of selling the agency, allowing the owner to continue running the business,” explains Don Cummins, founder of Stoneridge Partners and a Master M&A Intermediary. “The seller’s number one concern should be maintaining business as usual and not discerning if a buyer is qualified.”
For example, it’s typical for owners to receive numerous unsolicited offers from unqualified buyers. “Often, an unsolicited buyer will pressure a seller to lower the price or to actually finance the sale,” explains Cummins, who has over 15 years in the industry. “It’s not uncommon for owners to hear – I’m willing to buy your business, if you’ll loan me the money.”
We work with a select group of buyers who have been vetted for financial stability and industry knowledge,” says Cummins. “Many of these are large companies with cash and a strong understanding of industry pricing parameters.”
Some brokers may bombard a seller claiming to have interested buyers. Once a seller is engaged, and has perhaps signed an agreement, the interested buyers disappear. Because all along, the broker was really angling for a listing agreement.
“Stoneridge Partners is known for its integrity and professionalism,” says Cummins. “Our relationships among past clients, industry professionals, attorneys, and accountants are very important to us.”
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