How do I know when it’s time for me to consider selling my ASC?

Great question. You want to consider selling your ASC when an outside investor can add the most value to the partnership and right as you are peaking with what you can do with the center. This can occur at different stages for different surgery centers. There are buyers and sellers at all stages. It is tough to anticipate a future decline in business, so it is necessary to determine where the surgery center business is and where it is headed. Easy right? I recommend that you think of your ownership shares in your surgery center as you would shares in NIKE, Facebook, GE, etc.; value can go up or down almost anytime. Let’s take a look at the thought process in a more strategic fashion. What we do if we are brought in early enough in the decision making process is to recommend doing a SWOT (Strength, Weakness, Opportunities, Threats) analysis. There are others that you could use to get to the same place, but it is the one most of us have heard about and it is fairly easy and straightforward. A SWOT analysis guides you to identify the positives and negatives inside your Ambulatory Surgery Center business (S and W) and outside of it in the external environment (O and T). This will help you to develop a full awareness of your situation, which will help with creating a plan and making the decision. Do you hold or sell, and what is your path forward if you sell or hold? You can list internal and external opposites side by side. Answer these simple questions: what are the strengths and weaknesses of your physician group, your ASC, your market, and your efforts or actions, and what are the opportunities and threats facing it? Some of the elements typically found in a SWOT for a surgery center: Strengths  Young, engaged partners Multi-specialty case mix Well paying long term contracts Weaknesses Low volume High debt Disengaged partners Low paying contracts Overbuilt center Opportunities Ability to take on more cases or expand Improve payor contracts (e.g. an ASC that sold with payor contracts at 100% of Medicare. This was a huge buying point for the strategic buyer because it was an easy opportunity to increase revenue shortly after they bought the center.) Recruitable surgeons in the market Lower expenses Improve business best practices Internal cases that can be brought to the center Able to establish a direct to patient marketing program Threats Competing Hospitals In-office procedural rooms Competing ASCs Fractured partnership/disgruntled partners The major threat to success in the SWOT is “the competition.” So it can help to think of the competition in a broad sense as you consider threats to your...

How should an ASC define its wants, needs and desires?

Whenever you start the prepare to sell process or even a little before you need to understand the physician owner’s and the ambulatory surgery center company’s wants, needs and desires. This will help you in a couple of ways. It will help you get a handle on how you can tell your story or in other words sell your surgery center, the strategic position of the surgery center in the market place as well as understand what you need in a new partner. Additionally, know what you want out of a ASC sales transaction. We can discuss some of the typical wants, needs, and desire but this is mostly very center and owner specific. We ask each surgery center partner what they want to see in a buyer and what they want out of a sale of their surgery center. This helps get a handle on the questions, but also helps with physician buy in. We want to take a look at the thought process in a more strategic fashion. What we do if we are brought in early enough in the decision making process is to recommend doing a SWOT (Strength, Weakness, Opportunities, Threats) analysis. There are others that you could use to get to the same place, but it is the one most of us have heard about and it is fairly easy and straightforward. A SWOT analysis guides you to identify the positives and negatives inside your Ambulatory Surgery Center business (S and W) and outside of it in the external environment (O and T). This will help you to develop a full awareness of your situation, which will help with creating a plan and making the decision. Do you hold or sell, and what is your path forward if you sell or hold? You can list internal and external opposites side by side. Answer these simple questions: what are the strengths and weaknesses of your physician group, your ASC, your market, and your efforts or actions, and what are the opportunities and threats facing it? Some of the elements typically found in a SWOT for a surgery center: Strengths Young engaged partners Multi-specialty case mix Well paying long term contracts Weaknesses Low volume High Debt Disengaged partners Low paying contracts Over built center Opportunities Ability to take on more cases or expand Improve payor contracts (e.g. an ASC that sold with payor contracts at 100% of Medicare. This was a huge buying point for the strategic buyer because it was an easy opportunity to increase revenue shortly after they bought the center.) Recruitable surgeons in the market Lower expenses Improve business best practices Internal cases that can be brought to the center Able to establish a direct to patient marketing...

What should someone expect from the ASC buying and selling processes?

For us, expectations equal goals.  Some of the goals that sellers want are peak price and terms as well as a partner that will help grow their business. In order to be able to accomplish those goals, the sellers should expect and be prepared to create a strategic and PROACTIVE sales process and then execute on that process. This will put them in the best position to obtain their expectations. A proactive process will increase the speed, make it more efficient, and manage and increase the overall perception of the business in the eyes of the buyers-which directly affects the value. Additionally they can expect to learn more about their business, their market, etc. You want to know that in and out because you will understand the assumptions driving your financial model and this forms the basis for the valuation. We would recommend that sellers perform a SWOT analysis-Strength, Weakness, Opportunities, Threats. A SWOT analysis guides you to identify the positives and negatives inside your Ambulatory Surgery Center business (that is the S and W) and outside of it, the external environment (that is the O and T). This will not only help the sellers understand what they need but also communicate what they expect from a buyer and the sale process. Additionally, you need to expect to put a team around you to help ensure you meet your goals. Physician owners of ambulatory centers are very intelligent and accomplished professionals, but in general will likely only complete one or two sales transactions in the course of a lifetime. Yet those deals will probably be the largest and most significant financial surgery center sales transactions of their career. So by definition, the inexperience of these essentially novice surgery center sellers can prove financially catastrophic as they negotiate with a surgery center buyers’ full-time, professional M&A team. Additionally there are many implications such as legal and tax that you will encounter not to mention the negotiation strategies and business implications. Having the right advisors upfront can help you structure the transaction whereas to mitigate or lessen them You should have a team that consists of the following: Transaction accountant Business accountant Transaction lawyer Industry specific investment banker Key member(s) of your management team A transaction committee that is empowered by the group of owners and a Valuation professional  and lastly expect the unexpected and not allow it to create deal fatigue. Humans are emotional creatures and our emotions sometimes get the best of us and understanding the stressors going in will help you manage your...