How do you research the buyers and investors in those markets?

Researching the surgery center investor markets for most buyer universes is not complex. This process is one of the easy steps. For the 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 market. In each of the markets, when in doubt put them on the list of potentials. For the 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 the other ASCs in the state to see who their management companies are. Additionally Google is a great tool for locating the local and regional management companies. So is LinkedIn. For physicians you can look to the state provider databases, the hospital and other ASC provider directories and LinkedIn, we use LinkedIn a good bit to reach out to physicians, management companies, hospital executives and financial buyers. The toughest market for owners will be 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. The regional providers are typically the most interested compared to the national payers but things are...

How do you choose what surgery center buyers and investors to contact?

This goes back to the market and what you want, what market your surgery center fits into. If you center has an EBITDA of $600K and not really high level executive team, then there is zero reason to go to the financial markets. Thus you would look at the hospital health systems that are in your market area or want to be in your market area. How would you know if they want to be in the market area? Call them. When in doubt, pick up the phone and present the teaser. It is a lot of work, but at this stage of the process you MUST create competition. For example, one center had been in conversation with a hospital literally 5 miles from it for a few years. This hospital had not been very helpful in the development of the center by pressuring the docs to not refer there. A few times they made offers and over time those offers were reduced and timelines not met, etc. The physician owner finally engaged us and we created competition for the center through solicitation offers from health systems not in the local market, but with hospitals in the region. We were able to negotiate an increase in sales price of 40% and much more favorable terms with the hospital 5 miles away because they did not want the competition putting a flag down in their backyard. This was a situation where we allowed the rumors to fly because it helped drive up the price and allow us to have very favorable terms. It all started with the teaser being emailed, then a follow-up call presenting the teaser. ASC Management companies are fairly easy to locate. There are about 60 national and regional management companies. They all have websites that have information about them and their investment box. Recalling what we said about defining the market for you surgery center or your buyer universe if you center scores high as far as the most attractive characteristics and have an EBITDA of a million or more then the majority buyer would be in your universe. When in doubt send your teaser out, typically to the CEOs or development executives. Also have your surgery center development companies agreement drawn up and looked...

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...

Group Purchasing Organization (GPO)

A group purchasing organization (GPO) refers to a group of businesses who combine their purchasing power in order to get better rates on medical and other supplies. Management companies often operate as a GPO because their involvement with multiple ambulatory centers allows them to negotiate with suppliers and receive better rates. This is useful because lower rates help increase profits.

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...