Romance and the Sale of Your Ambulatory Center

Negotiating the Sale of Your Surgery Center

By: Blayne Rush, MHP, MBA
June 12, 2010

You heard it here first: what is true in romance is also true for the sale of your ambulatory surgery center (ASC) or radiation oncology center. That is, the more alternatives you have, the better the deal you are likely to get. Of course it is also true — as with romance — that each party’s idea of a “better deal” is unique to them. Looking for the richest would-be partner? The most popular? Mr. Ready-to-commit-right-now? Well, each desired end requires a different approach.

Regardless of the desired end, in order to obtain the best price in a sell-side transaction, it is imperative to reach out to and consider a wide range of potential suitors, and to do so in a systematic fashion early on in the process. If you do not have at least a few concrete and articulable alternatives, you have no leverage. Otherwise the experienced negotiators on the buyer’s professional development staff will surely take advantage.

Negotiation researchers Roger Fisher and William Ury of the Harvard Program on Negotiation (PON) have conducted in-depth analysis of what they call the “Best Alternative to a Negotiated Agreement” or BATNA. Experienced negotiators will see the BATNA not as a safety net, but as a point of leverage in negotiations for the sale of your ambulatory surgery center or radiation oncology center. By carefully and systematically conveying the BATNA to prospective purchasers at the critical juncture in the negotiation process, your investment professional will put you in the best position to meet your unique goals, whether your ideal suitor is raring to go, blessed with deep pockets – or both.

The ideal sell-side process is comprised of a two-stage solicitation process. It begins with an experienced and caring investment banker who will take the time and do the work required to fully understand the seller’s needs and wants for the sell-side transaction. As the seller, your goals should guide and underpin the framework for the entire undertaking. After all, individual owners of ambulatory surgery centers and radiation oncology centers often have a wide range of reasons for selling and just as wide a range of desired outcomes. For example, sometimes an owner may want an immediate, outright sale of the business for cash. Other times, a recapitalization or a strategic alliance is the desired end. Some owners want to leave the business as soon as the sale is consummated, while others would like a chance to “keep a hand in” for a set period of time in a specified role. Some sellers are absolutely clear on their objectives for a sale, while others require more time and information before they are sure of their desired end. Your investment banking professional should understand – and help you understand — the ramifications of various alternative deal structures so that you can choose the best structure, and the best counter-party, to realize your goals for the sale.

After you have identified your ideal outcome for the sale of your ambulatory surgery center or radiation oncology center, your registered investment banker should then help you prepare a Confidential Seller Profile and Confidentiality/Nondisclosure Agreement. The Confidential Seller Profile briefly highlights those attributes of your company that are most likely to appeal to potential purchasers, such as corporate assets, achievements, and growth potential. The Confidential Seller Profile is intended to be an anonymous description of the company in play (in this case, yours). Once these two documents are reviewed and approved, they will be among the first documents provided to prospective buyers.

Your registered investment banker will then work with you and your finance people to begin gathering the information needed to develop the Seller Memorandum. The Seller Memorandum is the central marketing piece for the sale of your ambulatory surgery center or radiation oncology center; it provides a much more comprehensive view of your company than does the Confidential Seller Profile. In fact, the Seller Memorandum closely resembles an annual report in terms of depth, although it is written from more of a marketing angle. The Seller Memorandum highlights your company’s financials, operations, management, and strategy. It also places your company in an appropriate context, with a thorough discussion of relevant micro- and macroeconomic forces facing the industry. Ideally, the Seller Memorandum should include a fiscal model: a rendering of historical and projected financials overlaid with data concerning the industry-specific and broader economic drivers that have affected your ambulatory surgery center or radiation oncology center in the past and that may impact it going forward.

An experienced investment banking professional will be able to identify and highlight the specific attributes of ambulatory surgery centers and radiation oncology centers that prospective buyers value most highly. Your Seller Memorandum should be written to identify and highlight those attributes, as well as call attention to benefits and advantages that a prospective purchaser may not previously have considered.

Once the Seller Memorandum is complete – or even while it is being developed — the next step in the sell-side process is to identify prospective and the most qualified buyers for your ambulatory surgery center or radiation oncology center. In order to consummate the sale efficiently, smoothly, and for the best possible price, the emphasis should most assuredly be placed on the word qualified. Your investment banker will conduct exhaustive research to pinpoint appropriate would-be purchasers and investors. Registered investment bankers will have access to public databases of information – and, if he or she is a seasoned professional with broad experience in the ambulatory care industry, will probably have a sizeable proprietary data warehouse as well. Companies interested in purchasing an ambulatory care company may surprise you. Depending on the circumstances, prospective purchasers may include not only companies that own and manage centers similar to yours, but also local or regional health systems, your closest competitors, tunnel buyers (such as a diagnostic group seeking to purchase a radiation oncology center), and financial firms (e.g., private equity groups).

Throughout this delicate period in the sell-side process, your investment banker should exercise utmost discretion and – where appropriate – take pains to conceal your identity from certain prospective buyers. For example, a particular seller may wish to keep news of a potential sale away from certain competitor companies – or to reveal such information to competitors only very late in the sales process. A seasoned, FINRA-registered investment banking professional will appreciate these and other aspects of the nuance of the deal, and will work with you and your other advisors to ensure that each contact with a prospective buyer is appropriate in terms of both timing and content. As with romance, timing and substance each play a critical role in ensuring a match made in heaven – to say nothing of happily ever after.


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