5 key concepts for ASC M&A deals

Healthcare transactions are on the rise as incentives to lower healthcare costs and a growing aging population make ambulatory surgery centers increasingly attractive to all types of buyers.

“There aren’t actually that many sellers out there in the space, but there are a lot of buyers who want to invest their capital in this space,” says Adam Goodman, head of ansarada’s New York office. “Being knowledgeable about what the buyers want and are interested in doing with this transaction puts them in a good position to have leverage when an offer comes across the table.”

The ansarada solution is a data room that is designed by the M&A industry for the M&A industry. The platform allows the buyer and seller to interact with sensitive information in a protected fashion and allows owners to place parameters on access to the documents, as well as pull documents down at any time. The platform collects questions and responses and provides a record of interactions.

“Now is the perfect time to consider a transaction,” says Mr. Goodman. “The longer business owners wait, they could harm their chances. People are looking to put their money to use now. If you have an ASC, it’s worth taking a look at the market.”

1. Hire an investment banker. Taking solicitations from buyers without an investment banker representing your interests isn’t the best move. Investment bankers bring expertise on trends in the market and fair multiples for selling the centers. And don’t take the first offer made.

“One of the mistakes we’ve seen is people trying to run their own transaction going exclusive with the first offer,” says Joel White, ansarada’s managing director in New York`. “If the deal doesn’t proceed, then they’ve invested in a due diligence process that isn’t approved and wasted time. One of the advantages of bringing someone on is they will make sure it goes through so you only have to do due diligence once.”

2. Prepare for due diligence. Running a successful deal starts before the deal is even on the table with due diligence preparedness. ASCs should have their documents together, and have even done a little due diligence on themselves first so when a deal comes across the owners’ desks, you avoid surprises, and have the documents available in a data room, ready to go. It costs little or nothing to create a data room and being prepared allows you to strike at the hot opportunity.

3. Figure out the buyer’s objectives. A hospital buyer has one objective and a private equity buyer or corporate partner may have another. The buyer may be looking to purchase a few centers and then sell them to another company, or move toward an IPO. The company might be looking to build and grow in the next three to five years, or the acquisition might be on the tail end of the company’s initial growth.

“Figure out what the second kick of the can looks like,” says Mr. Goodman. “The ASC might think this is their one M&A transaction and they want the best deal, but staying involved and participating in a second 'bite of the apple' down the road if the private equity investor does what they should do is very lucrative.”

But be wary of private equity firms that have a poor track record of buying a company without a long term vision. You don’t want the investor to buy the center, declare bankruptcy and sell all the assets within a short time frame after the deal closes.

“This is where having a safe and secure virtual data room comes into play,” says Mr. Goodman. “If the lender or buyer is telling you one thing but you can see they are focusing time and effort on certain documents for the wrong reasons, you can see they are in it for the wrong reasons.”

4. Keep patient records safe. Regardless of who the buyer is, they will have access to the ASC’s documents, including patient records. Healthcare providers are responsible for keeping those records safe, especially if the transaction falls through in the end.

“There are a lot of great ways to store data that aren’t appropriate for M&A deals,” says Mr. White. “When you need to protect patient data, there are specialty products for conducting data transfer safely during that process.”

The buyers often want to look at information at their own leisure, but a program like ansarada’s platform allows ASCs to “kill” the information at any time and have 100 percent certainty the data is still in their control.

5. Prepare for many questions. An ASC M&A deal isn’t a quick deal; there can be up to 7,500 questions in the six-week period leading up to the final transaction. “It’s intensive,” says Mr. White. “Without specialty tools it's difficult to keep up with Q&A, and document requests. You want to gather all the documents together and store them somewhere easy to access when the time comes.”

More articles on surgery centers:
The best decision I've made this year: 9 ASC administrators discuss
59 ASC management & development companies to watch in 2016
Making the leap to ASCs—The challenge of recruiting new surgeons

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