Here are five tips for physician owners to increase the value of a surgery center before a sale, according to Jon Vick, president, ASCs, Inc.
1. Know your goals. Physician owners should first meet to determine each individual physician's goals for the sale and document these goals in a "Statement of Goals," says Mr. Vick. Doing this will allow the physicians to approach prospective buyers with a clear understanding of their goals and who wants to sell how much, he says.
"Older doctors may want to sell 100 percent, and the younger [physicians] may want to sell none. These are not conflicting goals; they are individual goals," he says. "Based on the aggregate of the goals, the doctors may want to sell a minority or majority interest. Knowing this up front allows them to solicit purchase proposals from the right companies as some companies only buy majority interests and some just buy minority interests."
2. Know the buyers. "There are 40-plus ASC management companies interested in investing in ASCs, but each company is looking for something unique to their own model and expertise," says Mr. Vick.
Mr. Vick recommends that centers narrow down the list of potential buyers before soliciting proposals. "Narrow the field down to five or six of the best buyers for your center so you or your representative can solicit competitive purchase proposals," he says. "Consider which companies are looking for your type of center, in your location, with your specialties, revenues, profits and growth opportunities, etc."
3. Quantify your growth opportunities. While ASC values are usually determined by trailing 12-month (TTM) EBITDA, buyers are also interested in an ASC's growth opportunities, says Mr. Vick.
"[Buyers] want to buy into a growth situation, not into a center that is already fully utilized," he says. "Be specific: What strategies will enable your revenues and profits to increase? What doctors are available to be recruited? What hospital is available for a three-way deal? What contracts need renegotiating? How will you replace your out-of-network cases with in-network cases?"
4. Identify physicians who can be recruited. New physician recruitment is the number one growth opportunity for most centers. Therefore, physician owners should identify colleagues available to invest in or utilize the center and pass that information on to prospective buyers.
"You don't have to recruit new doctors, but you should identify good-quality physicians in attractive specialties for ASCs who can be recruited," says Mr. Vick.
5. Sell the ASC real estate as a second transaction. Finally, physician owners may want to consider selling the ASC real estate in a second transaction after they are affiliated with an ASC management company.
"The market for ASC real estate has improved markedly, and there are several excellent real estate companies competing to buy ASC real estate. ASC tenants are considered very attractive because they are stable, long-duration tenants," says Mr. Vick. "As soon as you have a corporate partner, the real estate becomes even more attractive, so the time to sell is after you have affiliated with an ASC management company."
Mr. Vick has assisted physician owners at over 200 ASCs to form strategic relationships with leading ASC management companies, since 1984. To learn more about ASCs Inc., visit www.ascs-inc.com.
1. Know your goals. Physician owners should first meet to determine each individual physician's goals for the sale and document these goals in a "Statement of Goals," says Mr. Vick. Doing this will allow the physicians to approach prospective buyers with a clear understanding of their goals and who wants to sell how much, he says.
"Older doctors may want to sell 100 percent, and the younger [physicians] may want to sell none. These are not conflicting goals; they are individual goals," he says. "Based on the aggregate of the goals, the doctors may want to sell a minority or majority interest. Knowing this up front allows them to solicit purchase proposals from the right companies as some companies only buy majority interests and some just buy minority interests."
2. Know the buyers. "There are 40-plus ASC management companies interested in investing in ASCs, but each company is looking for something unique to their own model and expertise," says Mr. Vick.
Mr. Vick recommends that centers narrow down the list of potential buyers before soliciting proposals. "Narrow the field down to five or six of the best buyers for your center so you or your representative can solicit competitive purchase proposals," he says. "Consider which companies are looking for your type of center, in your location, with your specialties, revenues, profits and growth opportunities, etc."
3. Quantify your growth opportunities. While ASC values are usually determined by trailing 12-month (TTM) EBITDA, buyers are also interested in an ASC's growth opportunities, says Mr. Vick.
"[Buyers] want to buy into a growth situation, not into a center that is already fully utilized," he says. "Be specific: What strategies will enable your revenues and profits to increase? What doctors are available to be recruited? What hospital is available for a three-way deal? What contracts need renegotiating? How will you replace your out-of-network cases with in-network cases?"
4. Identify physicians who can be recruited. New physician recruitment is the number one growth opportunity for most centers. Therefore, physician owners should identify colleagues available to invest in or utilize the center and pass that information on to prospective buyers.
"You don't have to recruit new doctors, but you should identify good-quality physicians in attractive specialties for ASCs who can be recruited," says Mr. Vick.
5. Sell the ASC real estate as a second transaction. Finally, physician owners may want to consider selling the ASC real estate in a second transaction after they are affiliated with an ASC management company.
"The market for ASC real estate has improved markedly, and there are several excellent real estate companies competing to buy ASC real estate. ASC tenants are considered very attractive because they are stable, long-duration tenants," says Mr. Vick. "As soon as you have a corporate partner, the real estate becomes even more attractive, so the time to sell is after you have affiliated with an ASC management company."
Mr. Vick has assisted physician owners at over 200 ASCs to form strategic relationships with leading ASC management companies, since 1984. To learn more about ASCs Inc., visit www.ascs-inc.com.