Volume 9, Issue 25, December 6, 2022
By David E. Coit, Jr., DBA, CVA, CVGA, CM&AA, CBEC
Congratulations! You’ve just sold your business, completing an exhausting period spanning many months. The process was made easier thanks to the support of an experienced healthcare M+A advisor, but you’re still relieved it’s over.
Yet, a question lingers in your mind: What do you do now?
This is a common experience for many sellers. After all, during the sales process, owners are often fixated on the day-to-day operations of their business or practice, negotiations with the buyer, valuation, and completing the sale. Little time was spent thinking about issues like:
Your post-sale experience does not need to be filled with such uncertainties. Let’s look at what you can do, with the continued help of your M+A advisor, to make the transition from business owner to non-owner as simple and comfortable as possible.
Take the following steps before or immediately following the sale to get your house (business) in order.
Next, consider your future role with the company and buyer. For some owners, staying on following a sale can positively impact the seller financially and mentally.
If you plan to stay with the company post-sale, ask yourself the following questions:
Next, let’s discuss limiting your future liabilities. If necessary, continue working with the buyer to ensure your name as either obligor or guarantor is removed from all lease contracts, including office or medical equipment leases, rental agreements, and service contracts, such as software (e.g., SaaS), data storage agreements, and vehicle leases. Make sure you are no longer a signor on any company checking accounts. Don’t forget to cancel any company credit cards in your name.
Buyers are particularly concerned about customer and employee retention post-closing. As such, buyers typically desire that one or more sellers/owners stay with the company during a transition period to work on retaining customers and employees.
The primary reason some acquisitions fail to provide buyers with their expected return on investment is the loss of customers/patients and key employees. For customers or patients of healthcare-related industries, the change in ownership is often felt in a big way. You typically see a significant customer satisfaction drop in the wake of an acquisition up through the first two years of the sale.
Businesses or practices should look for ways to retain the customer brand experience as much as possible rather than asking long-time customers or patients to adopt a different experience. Cultural differences between buyers and sellers create challenges for customers, patients, and employees. When a buyer’s culture is similar to the seller’s, customers, patients, and employees will more easily adapt to the new environment.
M+A also often has a negative effect on customer satisfaction because transactions aren’t completed on behalf of customers; they’re completed on behalf of shareholders. The buyer and seller need to keep a customer or patient focus during and after the M+A process. Buyers need to take additional steps to reach out to customers or patients to let them know they are valued and will be cared for post-sale.
A few recommendations:
Some additional recommendations:
Furthermore, according to a recent Economist Intelligence Unit report, organizational differences and human capital integration issues are two of the most significant challenges faced during M+A. The reasons include the following:
What can you do to reduce the impact of a sale or acquisition on employees?
Many business/practice owners feel a sense of being lost post-sale. You should develop a plan for what’s next for your life post-sale. What will happen to your relationships with business associates, friends, and family post-sale? Prepare yourself for a change in your relationships with these individuals as you transition from being a business/practice owner.
If retirement is in your plans, consider the four phases of retirement introduced by Dr. Riley Moynes. You may also want to consider recommendations from BNY Mellon:
Your attorney will probably recommend you take time to get your affairs in order, such as creating a will, setting up an advance directive for medical/surgical treatment, reviewing and amending insurance policies (as needed), and designating a power of attorney in an emergency event.
If you wish to learn more about the impact of M+A on customers, patients, and employees, or if you wish to discuss the M+A process, please feel to reach out to me at email@example.com or call (480) 285-9708.
David is a seasoned commercial and corporate finance professional with over 30 years’ experience. As part of the VERTESS team, he provides clients with valuation, financial analysis, and consulting support. He has completed over 150 business valuations. Most of the valuation work he does at VERTESS is for healthcare companies such as behavioral healthcare, home healthcare, hospice care, substance use disorder treatment providers, physical therapy, physician practices, durable medical equipment companies, outpatient surgical centers, dental offices, and home sleep testing providers.
David holds certifications as a Certified Valuation Analyst (CVA), issued by the National Association of Certified Valuators and Analysts, Certified Value Growth Advisor (CVGA), issued by Corporate Value Metrics, Certified Merger & Acquisition Advisor (CM&AA), issued by the Alliance of Merger & Acquisition Advisors, and Certified Business Exit Consultant (CBEC), issued by Pinnacle Equity Solutions. Moreover, the topic of his doctoral dissertation was business valuation.
David earned a Doctorate in Business Administration from Walden University with a specialization in Corporate Finance (4.0 GPA), an MBA from Keller Graduate School of Management, and a BS in Economics from Northern Illinois University. He is a member of the Golden Key International Honor Society and Delta Mu Delta Honor Society.
Before joining Vertess, David spent approximately 20 years in commercial finance, having worked in senior-level management positions at two Fortune 500 companies. During his commercial finance career, he analyzed the financial condition of thousands of companies and had successfully sold over $2 billion in corporate debt to institutional buyers.
He is a former adjunct professor with 15 years' experience teaching corporate finance, securities analysis, business economics, and business planning to MBA candidates at two nationally recognized universities.