At the 19th Annual Ambulatory Surgery Centers Conference in Chicago Oct. 26, John Poisson, executive vice president and strategic partnerships officer of Physicians Endoscopy, discussed maximizing endoscopy ASC value and sales price.
Mr. Poisson presented six key challenging areas in maximizing EASC value and strategies for addressing those challenges.
1. Legal structure of the ASC. ASCs need to ensure they are structured in a way that enables them to legally sell to a hospital or management company. For instance, an S-Corp. or professional limited liability company would not work and would need to be converted, according to Mr. Poisson.
2. Pre-sale preparation. ASCs need to do significant planning to prepare the facility for a sale. Mr. Poisson shared key tasks of owners in the pre-sale preparation:
• Decide desired outcomes upfront. Is the goal to maximize sales proceeds? Bring in a partner to assist with growth and management? Pave the way for a future relationship with a hospital? Answering these questions can help an ASC determine appropriate potential buyers. In addition, ASCs should address differences in expectations between younger and older physicians. Older physicians tend to lean more toward maximizing cash proceeds, while younger physicians are more focused on growth and are less inclined to sell equity, according to Mr. Poisson.
• Develop and implement a business strategy.
• Designate a primary liaison for buyer communications.
• Prepare historical data to present to buyers.
• Articulate a growth plan. For example, if some physicians in the ASC plan to retire soon, the ASC should have a physician recruitment strategy.
• Address downside risks. ASCs should have a plan for eliminating or minimizing downside risks.
• Set dates to meet with buyers. Mr. Poisson suggested ASCs set aside two to three hours for each buyer, as this is a time when ASCs can learn about the culture and "fit" of the buyer.
3. Selection of potential buyers. ASCs should decide whether they want to sell to a management company or hospital or health system, and if they want to use a majority or minority model. In the majority model, the buyer has a 51 percent or greater stake in the center, while in a minority model, the buyer generally has 15 to 45 percent. To determine a buyer, Mr. Poisson suggested ASCs consider the potential benefits of each buyer, the buyers' flexibility and the buyers' plans to navigate healthcare reform.
4. Buyer interviews/presentations. All physicians should attend buyer interviews and presentations, and they should decide beforehand which questions to consistently ask buyers, according to Mr. Poisson. He said ASCs should not allow a "canned" presentation of the buyer, as that would allow the buyer to control the flow and information. ASCs should focus on growth and upside of the sale but also have honest answers on the downside risk. In addition, ASCs should conduct reference checks on each buyer.
5. Selection of the buyer. Buyer selection should be unanimous or near unanimous, according to Mr. Poisson.
6. Closing the transaction. ASCs will need to do due diligence verification and validation after signing a letter of intent.
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Mr. Poisson presented six key challenging areas in maximizing EASC value and strategies for addressing those challenges.
1. Legal structure of the ASC. ASCs need to ensure they are structured in a way that enables them to legally sell to a hospital or management company. For instance, an S-Corp. or professional limited liability company would not work and would need to be converted, according to Mr. Poisson.
2. Pre-sale preparation. ASCs need to do significant planning to prepare the facility for a sale. Mr. Poisson shared key tasks of owners in the pre-sale preparation:
• Decide desired outcomes upfront. Is the goal to maximize sales proceeds? Bring in a partner to assist with growth and management? Pave the way for a future relationship with a hospital? Answering these questions can help an ASC determine appropriate potential buyers. In addition, ASCs should address differences in expectations between younger and older physicians. Older physicians tend to lean more toward maximizing cash proceeds, while younger physicians are more focused on growth and are less inclined to sell equity, according to Mr. Poisson.
• Develop and implement a business strategy.
• Designate a primary liaison for buyer communications.
• Prepare historical data to present to buyers.
• Articulate a growth plan. For example, if some physicians in the ASC plan to retire soon, the ASC should have a physician recruitment strategy.
• Address downside risks. ASCs should have a plan for eliminating or minimizing downside risks.
• Set dates to meet with buyers. Mr. Poisson suggested ASCs set aside two to three hours for each buyer, as this is a time when ASCs can learn about the culture and "fit" of the buyer.
3. Selection of potential buyers. ASCs should decide whether they want to sell to a management company or hospital or health system, and if they want to use a majority or minority model. In the majority model, the buyer has a 51 percent or greater stake in the center, while in a minority model, the buyer generally has 15 to 45 percent. To determine a buyer, Mr. Poisson suggested ASCs consider the potential benefits of each buyer, the buyers' flexibility and the buyers' plans to navigate healthcare reform.
4. Buyer interviews/presentations. All physicians should attend buyer interviews and presentations, and they should decide beforehand which questions to consistently ask buyers, according to Mr. Poisson. He said ASCs should not allow a "canned" presentation of the buyer, as that would allow the buyer to control the flow and information. ASCs should focus on growth and upside of the sale but also have honest answers on the downside risk. In addition, ASCs should conduct reference checks on each buyer.
5. Selection of the buyer. Buyer selection should be unanimous or near unanimous, according to Mr. Poisson.
6. Closing the transaction. ASCs will need to do due diligence verification and validation after signing a letter of intent.
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