Your Primer to Healthcare Mergers and Acquisitions

You Just Sold Your Healthcare Business. What's Next?

Dec 5, 2022

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:

  • Cleanup/follow-up issues that must be addressed.
  • The role, if any, you’ll have in the future success of your former business/practice.
  • How you can limit your future liabilities.
  • How you can help retain customers/patients and employees.
  • What becomes of your life post-closing.

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.

Cleanup and Follow-Up Issues

Take the following steps before or immediately following the sale to get your house (business) in order.

  • Work with your attorney to ensure all seller’s obligations after closing have been met or waived by the buyer.
  • Ensure you’ve been reimbursed for all company expense charges on your personal credit cards.
  • Discuss expected future inflows of monies with your financial advisor or wealth manager.
  • If there is an earnout, work with the buyer and your attorney to schedule reminders to ensure you receive the future earnout(s).
  • Schedule a reminder with the buyer to receive an accounting of the 60- or 90-day working capital cleanup.
  • Schedule a reminder of when you should receive holdback monies being held in escrow.
  • If there is a seller note, work with the buyer to schedule reminders for future payments due to you under the note.
  • Schedule a reminder of the expiration date of indemnity claims.
  • Schedule a reminder of the expiration date of the non-compete agreement, if applicable.
  • Work with your accountant/tax preparer to estimate your future tax liabilities.
  • Make sure all your legal fees are paid in full soon after closing.

Your Future With the Business

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:

  • What do you value about remaining involved in your business, financially and personally?
  • How much time are you willing to devote to your business after it is sold?
  • What will be your responsibilities?  Decide if you prefer the role of consultant, board member (either regular board to advisory board), or business development/retention specialist.
  • How dependent will you be on income from your business after it is sold?
  • How dependent might a buyer be on keeping you involved in the business after it is sold?
  • What does the buyer expect if you plan to assist in a short-term transition role?
  • What do you want your compensation to be?
  • How/when can you terminate your future role?

Future Liabilities

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.

Customer/Patient and Employee Retention

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:

  • Take steps to ensure the customer or patient experience and satisfaction do not decline.
  • When competitors often hear the news of a sale or buyout, they use customer uncertainty and doubt to their advantage.  The best way to mitigate the threat of pilfering competitors is to make clear the value of the newly acquired business.  Companies or practices can go on the offensive and proactively communicate their strengths and the benefits of the acquisition for the customers or patients.
  • Establish and standardize processes early, so everything that made the seller company or practice successful has the best chance of being repeated by the buyer company or practice.

Some additional recommendations:

  • Establishing teams focused on customer/patient retention throughout the integration process is essential.
  • Plan on communicating with customers/patients your reasons for selecting a buyer who will continue providing them with valued products and services.
  • Create multiple ties between customers/patients and staff to reduce the risk of employees taking customers/patients to potential new employers.
  • Having one-on-one handoff meetings with key customers/patients may be worthwhile.
  • Consider working with the buyer to fend off competitors trying to take advantage of customer/patient uncertainty regarding the sale of your business.
  • Similarly, competitors may attempt to steal employees who are uncertain of their future with the buyer.  Also, plan on taking steps with the buyer to maximize employee retention.

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:

  • Experienced senior leaders may leave an organization if they no longer feel connected to its purpose.
  • Managers who receive mixed messages pass on their confusion to direct reports.
  • Uncertainty resulting from an acquisition can increase stress levels and signal risk to the seller’s employees.
  • Acquisitions tend to result in job losses for employees in redundant areas in the combined company.

What can you do to reduce the impact of a sale or acquisition on employees?

  • Attempt to align compensation and benefits, so employees are not negatively financially impacted by the acquisition.
  • Employees will likely find themselves in unfamiliar territory with new coworkers and the management team.  Increase the level of communication between employees and the new management team.  Provide employees with additional reassurance that they are valued and respected.
  • Emphasize to employees the many benefits of the sale/acquisition, such as new job opportunities, upward mobility, new training opportunities, the virtues of being employed by a larger organization or practice, and the possibility of job relocations, if applicable.
  • M+A often opens the door to all kinds of innovations.  Employees who ordinarily have little chance to present new ideas to senior leaders may suddenly find themselves with access to a receptive audience.  Those who are willing to speak up may get noticed.  
  • The new management team will be looking to take advantage of best practices.  Wise leaders will seek input from all employees on how to best do their jobs and create value.  This is a great time for employees to shine in the eyes of the new management team.

Life Post-Closing

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:

  • Taking time to rest and contemplate.
  • Reinvigorating relationships with friends and family.
  • Identifying values that are of utmost personal importance and matching them with appropriate activities.
  • Revisiting old hobbies or learning new skills.
  • Engaging in charitable endeavors.
  • Exercising regularly.
  • Traveling to places they have always wanted to visit.

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 or call (480) 285-9708.

David E. Coit, Jr.

David E. Coit, Jr. DBA, CVA, CVGA, CM&AA, CBEC

Director, Finance + Valuation/Partner

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.

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