So you're thinking about selling your healthcare business. Aside from starting your company, this might be the most important step you'll take in your career. The majority of healthcare sellers will be involved in an M+A transaction once, so there is only one chance to get it right. 

Getting it right typically involves working with the right healthcare advisor/broker. This person can help you find prospective buyers, identify the right buyer for you, and successfully navigate the waters of the transaction — which will likely be choppy at times — from beginning to end. 

To help you make a sound choice of a healthcare M+A advisor, here are some questions to ask yourself as you interview prospects.

It's been a wild ride for M+A activity in the healthcare space these past few years, with several significant global and domestic issues impacting deal flow. The effects of the COVID-19 pandemic will be felt for a long time. Russia's invasion of Ukraine has created global uncertainty. Domestic inflation has created cautious investors. Labor shortages have decreased profits for many providers.

All of these weighed down the healthcare space, yet it's estimated that of the $1.6 trillion in "dry powder" (i.e., unspent capital) globally, 15% is expected to be allocated to healthcare. And of that 15%, I expect a good percentage to go toward behavioral health.

Following the lull of transaction activity that affected all of healthcare in the first several months of the COVID-19 pandemic, the behavioral health space has experienced fairly steady transaction activity, including some large deals that had ripple effects throughout the space.

Two of the most frequent questions sellers of healthcare businesses ask VERTESS Healthcare Advisors are, "What can go wrong? How can I prevent my deal from falling apart?" Some deals are simply destined to fail, whether it be because a buyer or seller changes their mind or the parties come to an impasse. But then there are those potential deal killers that can be avoided.

Based on some recent experiences, my colleagues and I have compiled 10 reasons deals have had the potential to fall apart and offer recommendations for what you can do to reduce the likelihood that your deal experiences an unfortunate ending.

If you are looking to acquire or sell a healthcare business, something you will quickly find is that there is a lot of terminology and lingo specific to mergers and acquisitions (M+A). M+A has its own diverse vocabulary. The more you understand these terms, the easier it will be to engage in the transaction process. Even a surface-level understanding of key concepts will at least provide a foundation to better participate in conversations and ask more in-depth questions.

Below is a list of some of the most common terms and acronyms you are likely to encounter in your discussions and review of documentation. If you come across an unfamiliar concept, do not hesitate to ask one of your M+A partners, such as an advisor like VERTESS or your healthcare attorney, to explain it to you. During the M+A process, ignorance is definitely not bliss.

I have recently encountered a few situations where partners in a business do not agree on the current plan for the company, with one partner(s) is ready to sell while the other(s) is not. This is often a situation unanticipated by entrepreneurs when they decide to become partners in a business. This is not surprising. After all, the focus at the time of the partnership is usually the start of the business rather than its potential or eventual conclusion. Thus, there is rarely a conversation about the end game — the exit when one or all owners are ready to retire or move on to the next start of their career.

A business partnership where owners have equal stake in the company can lead to a plethora of problems from disagreements in operations to exit strategies. Whether you're just starting out or already functioning as a super team, it's never too early to discuss the "what ifs" for future decisions. But wait too long and it can't be too late!

Mike Gillette is a friend, colleague, and a lawyer and shareholder at Polsinelli (mgillette@polsinelli.com) who has helped many of my sellers transact. I asked him to share some insight from a legal perspective into how co-owners of a business should address issues that develop around disagreement about the future for the company. The following section summarizes his thoughts.

The world of healthcare mergers and acquisitions (M&A) has experienced a significant rollercoaster these past two years, primarily due to the events of COVID-19. Before the pandemic locked down our communities, M&A, particularly in the health and human services space, was experiencing a significant increase in activity. This was caused by several factors. Among them: Existing organizations — or strategic buyers — were witnessing the benefits of growth through acquisition to compete with larger businesses and prepare for managed care, while private equity investors saw this field as one worth investing in. With an excess of cash reserves (i.e., "dry powder"), these private equity investors started spending.

There is a struggle these days to find reliable and competent leadership. In many ways, the human services industry exemplifies the challenge. Despite an abundance of books, speeches, and guides that focus on the creation of good leaders, their absence persists.

This persistence, however, is not a result of our inability to pull good leadership from thin air. Rather, it's about our inability to simply look at the colleagues around us. Good management is cultivated, not found. This isn't a radical claim and is a concept I'm sure many are familiar with. But few, it seems, have managed to successfully cultivate new leaders. A complex reason why this challenge exists within the human services industry: gender disparity, especially for women of color. Human services is an industry that should, above all things, champion equity and equality for its clients/consumers — no question. Yet, if those same principles are not reflected in management, a company may find itself ill-equipped to champion anything. 

I was recently speaking with one of the sellers I represented about the sale of his provider agency. I asked him what he thought was my most significant value during his long selling process. Without skipping a beat, he said, "'The emotional support you provided to me." He explained that it was helpful to talk with me when things got stressful or even a bit scary since I had been through the process of selling my own company.

As human services business owners and operators, we should not apologize when our businesses earn a profit. Rather, it's time to stop shielding our staff from the important discussion of budgets and bottom lines. They should have some exposure to the budgeting process and understand the need for a healthy bottom line.

I often receive calls from owners of human services companies who say something along the lines of, "I don't know what I don't know" concerning selling their company. What's important to understand is that it's okay not to know everything about selling a company. It's a complex process, which is why most successful sales involve a team working together toward a common goal.

At VERTESS, we are often asked what value we can bring to sellers as they decide to sell their business. We often talk about our large contact list of buyers and our experience as a business operator/owner and seller or as a merger and acquisition (M&A) advisor.

For anyone running a business, it is always important to develop a succession plan. Who will take over leadership if someone moves on? How will you keep the cogs turning when you have a change in control? Yet many small- to mid-sized business owners are so mired in the details of the day-to-day operations that they don't consider such changes since they take on staff responsibilities until someone else rises to the occasion. But if you run an organization, you need to be asking yourself: Who will step in when you're ready to step away?