Your Primer to Healthcare Mergers and Acquisitions

Author: David Purinton

Market Trends
5 Key Healthcare M+A Transaction Deal Terms Sellers Should Know

It's January, so many of you may be reading this article for guidance on your 2023 M+A plans. Right about now, your internal dialogue may sound like, "I want to retire soon but the economy seems unstable, so why would I sell before it corrects?" Indeed, economic and industry indicators are mixed, almost like an economic whodunnit mystery with fingers pointing around the circle of suspects, all awaiting Sherlock to tell us when to initiate an exit. But if you step back from the scene of the crime, you will notice the partygoers are all buyers and sellers who share the same intention: to complete M+A transactions.

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Exit Planning
Confidential Information Memorandum (CIM): Its Key Role in a Sale

There's the expression, "You never get a second chance to make a first impression." For many healthcare business owners thinking about selling their company, the first impression they may personally make on prospective buyers will come from a confidential information memorandum (CIM). And if that CIM doesn't represent the business in a professional, positive, and transparent manner, the owner may not get a chance to receive a fair offer.

What exactly is a CIM? It's the document used to market your business to potential buyers. It may go by other names, including a pitch deck, investor deck, the "book," or confidential information presentation (CIP). The document is typically called a CIM when used in the sale of a mature business and a pitch deck for startups.

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Healthcare Sectors, Market Trends
SUD Buyer Study: Key Takeaways for Healthcare Business Owners

The information covered in the following column is derived from two sources. First, VERTESS recently conducted a survey of more than 20 buyers of substance use disorder (SUD) treatment providers on a variety of topics, including acquisition strategy and market trends. Second, I engaged in extensive discussions with fellow VERTESS team members who collectively are heavily involved in the private capital markets and witness the cycles in the verticals we represent.

My intentions in this column are to articulate broad concepts in current trends and developments within the broader healthcare M+A markets. While I am writing for owners of all healthcare businesses, there is a special emphasis on owners of SUD treatment businesses since the survey conducted was with SUD buyers and SUD is an area in which I specialize. SalientValue also has articles on general recommendations for healthcare business owners and vertical/segment specific articles outside of SUD.

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Exit Planning
Evaluating M&A Advisors: 5 Questions Healthcare Business Owners Should Ask

Thinking about selling your healthcare business? Then you undoubtedly have many questions. And if you've looked to Google to get answers, you've probably found that your searches have yielded divergent, overly complex, or abnormally vague responses. Why can't you find clear answers?

It's because the answer to most of your questions is: It depends. There are many factors that influence the sale of a healthcare business. But that doesn't mean your questions aren't worth asking. There are no bad questions to ask when contemplating one of the biggest — if not the biggest — decisions of your career. To get answers to your questions, don't turn to Google. You'll want to turn to an M&A expert. Getting clear and correct answers to your questions is one of the many reasons why having an M&A advisor will make a big difference as you proceed with a sale. But first you need to find the right advisor.

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Healthcare Sectors, Market Trends
SUD Treatment Industry Trends and Developments

We recently heard of an investor bidding more than 20x forward-EBITDA on a residential substance use disorder (SUD) treatment center with a 30-day due diligence period. This caught our attention. More poignant was that this bidder lost the deal to another investor.

It is no new news that SUD treatment providers across multiple segments are currently worth more than they ever have been historically. When Pitchbook released its 2021 Q3 report on the behavioral health vertical, we learned that in only nine months, more deals and more deal value were transacted than the previous best year on record in 2019. Some experts anticipate 2021 to finish at least 40% higher in both metrics than 2019, and SUD treatment — residential treatment, in particular — makes up a substantial portion of that activity, due to extraordinary utilization of benefits and new product designs from insurance carriers that promote mental health reimbursements such as Anthem’s “Behavioral Health Advantage” plan that is expected to launch in 2022.

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Exit Planning, Healthcare Sectors
The Story of My Sale: Spero Recovery

I recently joined VERTESS as a managing director. I'll be providing merger and acquisition (M+A) and consulting services primarily to the behavioral health and substance use disorder (SUD) treatment markets. Like many of my new colleagues, I previously owned and operated a company in the space I will be working in for VERTESS. But that's not all: I also have firsthand, personal experience with substance misuse.

In this column, I'll share a little about this journey with you, how it motivated me to open my company, and several of the key lessons I learned from the sales process.

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