Letter of Intent (LOI)

The Letter of Intent (LOI) is a legal document that outlines the agreement between two or more parties before an agreement is finalized. LOIs are not entirely binding, though they may contain provisions that are binding such as a non-disclosure agreement or “no-shop” provision. LOIs are used to: clarify key points of a transaction for all parties involved officially declare the parties are negotiating provide safeguards in case the deal collapses verify issues of payment for someone else (e.g. credit card...

How do I know what buyers are interested in my ASC?

There will be organizations that contact you directly to gauge your interest in selling your center. They could utilize any form of negotiation tactics to leverage the best price for THEM. They may even state that your center is of strategic interest to them and that their offer is based off of their strategic needs. While this could be true, the only way you can be confident that you are getting the best offers is to create competition for your center. Researching the investor markets for the surgery center buyer universes is not complex. This process is one of the easy steps. For hospital health systems, look towards the hospitals in your immediate market and then the outlying markets for systems that might have an interest in putting a flag in the ground in your ASC’s market. In each of the markets when in doubt, put them on the list of potentials buyers. For ASC management companies you can look at the ASC association directory, Becker’s Review list of management companies, attend ASC conferences as well as call other ASCs in the state to see who their ASC management companies are. Additionally Google is a great tool for locating local and regional management companies. So is LinkedIn. For physicians you can look to state provider databases, the hospital, other ASC provider directories and LinkedIn. We often use LinkedIn to reach out to physicians, management companies, hospital executives and financial buyers. The toughest market for owners is the financial markets. This market is very large and if you have no experience with this market, the tough part is figuring out who would be open to buying ASCs. There are databases that are professionally prepared that have contact information and investment criteria that you can read. You can send out your teaser to the contacts listed. Additionally if you are thinking payers are within your universe, just look at the list of the insurance providers in the area. Regional providers are typically more interested than national payers, but things are...

How do you manage the process?

So how do you manage the process? No surgery center buyer offers to pay a higher price without being incentivized, even if it can afford to. It is the seller’s responsibility to employ a transfer process that leverages its strengths so that an ASC buyer will pay the maximum price and fair terms. Having said that, you want to release information as close to your timeline as possible in order to manage the process and your timeline and CREATE THE COMPETITION that will allow you to obtain the peak price and terms. We want the buyers to be in the same stage of the process as the others so we can leverage them against each other and be more confident in our negotiating position. We typically, if the surgery center warrants this, go to the private equity group markets and to ASC Management Companies, then to hospitals. The reason is that in our experience that is the order of the highest priced offers and we want to have offers in hand if at all possible before hospitals health systems go to obtain a FMV. We set the tone and outline what we want to see in a LOI during discussions with the ASC investor/buyers. We do not allow no-shop clauses unless they are accompanied with break-up fees. In other words, we will continue to market the surgery center and negotiate with potential buyers unless you put up money that if you do fail to close you lose it. Most of the buyers will attempt to have the no shop clause in the LOI but back off of it when we convey the break-up fee or they will pay the breakup fee. We have gotten break up fees into LOIs with all types of buyers. You might even receive what a buyer will convey as a preemptive offer, which is an offer that has the intent and it is an attempt to lock out the other bidders with a high purchase offer.  Simply put they want to prevent you from marketing the surgery center, locking the center up with their offer while they conduct their due diligence. In these cases you need to look for the loopholes in their LOI and point those out, but most are not really preemptive offers, they just want you be buy into that and agree to the no shop...

How do I know what someone is willing to pay for my center?

How do I find out what someone is willing to pay for my center? We recommend a two stage offer solicitation process. We will proactively market your center to multiple buyers and multiple buyer types, then leverage competitive bids. This process helps answer the question of what buyers will be willing to pay for your...