What are some typical deal killers and how should an ASC address them early on?

Here are some things that kill deals:

  • Time – taking too long (addressed by being¬†very prepared when selling your surgery center)
  • Not knowing what you want (unable to make a decision)
  • Unrealistic expectations
  • Not knowing the market
  • Arguing over positions rather than working to find a way to get the deal done
  • Not having your physician partners bought in
  • Not having open communication (kills the trust factor)
  • Not disclosing potential snags early on or trying to hide issues –¬†buyers will find out all the problems during the due diligence process and then the seed of doubt could creep in
  • Coming to an agreement on deals terms then wanting to change them later

For example, one client seller got information from their lawyer that the prevailing multiple for surgery centers was 5-7 times. The problem was that the lawyer understood that it was 5-7 times of EBITDA for 50% of the company. Think about that: 5-7 x of 100% of EBITDA for 50%, which in reality would have made it 10-14 times EBITDA. We had an early LOI come in that we thought would be solid with some negotiating, but because it was not 10-14x, the main selling doc dismissed it as a bad offer and did not want to discuss it. We spent the next 4 months collecting other offers and speaking with other buyers just to allow the market to educate the client. Luckily we knew that the first LOI was solid and continued to engage the buyer to keep them engaged and wanting the deal because we ended up selling to that buyer. Know the market because not knowing kills deals.

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Category: Selling My Ambulatory Surgical Center
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