2. Weigh the options of a minority or majority ownership stake — There are management partners on both sides of the stakeholder fence, so it’s important to carefully evaluate both options before you decide on which model to pursue. If you sell a minority share of the ASC, the liquidity event will be less than in a majority transaction, but you could possibly maintain some board and management control. You can reduce your risk and liabilities by selling a majority stake, but may lose control of business decisions. The biggest factor in making this decision will be determining what is most important to you and your physician partners post acquisition.
3. Understand what affects selling price — Most ASC corporate partners want to invest in a business with growth potential and the fewest number of risks. Take an honest assessment of your facility and be on the lookout for those factors that directly affect selling price such as partnership stability, recruitment environment, and payor mix. Key considerations regarding price include prospects for growth, risks to cash flow, partnership issues, and location.
For example, if your facility is profitable and located in a Certificate-of-Need state, the valuation will be much more favorable because of the growth potential due to the limited barriers to entry. Consequently, a facility located in a highly competitive area with a majority of out-of-network contracts and a weak partnership would be valued much lower. Knowing these factors can help you decide if you are ready to sell your ASC, or if you should focus on improving operations before making the move to take on a corporate partner.
4. Know what you want in a partner — Define the characteristics you are looking for in an ASC partner and the goals you want them to achieve. Do you expect to grow the center? Attain better negotiated contracts for reimbursement? Earn quarterly distributions? You will ultimately align these wants and needs with the capabilities of potential buyers to find the right match for your facility.
5. Make the time to get acquainted with potential buyers — Selling shares of your ASC is a business transaction, but taking on a management partner is the beginning of new long-term relationship. Research the industry to find interested buyers, then narrow down the list based on preliminary meetings and feedback. The next step should be to personally interview your top picks to gain insight related to their approach, experience, management team, and track record. Always ask for and check references to hear what their current physician partners say about them.
Mr. Hancock is president and chief development officer of Meridian Surgical Partners, which specializes in ASC acquisition, development, management, and turnaround. Learn more about Meridian Surgical Partners.
