The Path of the Investment Banker in a Healthcare Transaction

Private InvestorWhen working through the process of selling an outpatient healthcare business, a seller always wants advisors on their side that will be able to help boost the multiple or terms of the final deal.  The key player to helping achieve that goal is an investment banker.  The Ambulatory M&A Advisor goes into detail about what an investment banker does for a transaction, what to look for in an investment banker, and when to make the decision to hire one to assist in the deal.

Blayne Rush, investment banker, President of Ambulatory Alliances, LLC says that investment bankers, to give a sports analogy are like the head coach.  They are the ones that are going to understand, or should understand the selling business from a 360 degree angle.

“They are going to have the experience and the knowledge, relationships etc. to understand it from all of those angles.  They understand when the accountants are needed, when the lawyers are needed etc.  They will have relationships with those guys as well, Rush says.

Rush says an investment banker is the person that comes in and understands the represented business from the historical story, to the current story, to the future story.  Investment bankers examine where the  business is going and what are the opportunities for the business.  They also ask why the business has not taken those steps, and why this potential buyer can help you it there or lead it to that point.

“They are going to come in and prepare the business for that potential investment or potential acquisition.  They are going to come in and  look at it and figure out what the buyers and investors want to see and how to put it in the best light.  I personally believe that the more prepared that we are, and the more that we get all of that due diligence collected up front, and all of that information prepared, and understand your business in and out, the better off we are going to be whenever the buyers come to the table,” Rush says.

Carol Lucas, shareholder of Buchalter Nemer explains that knowing when to hire an investment banker is pertinent to helping the transaction succeed.

“There are two different ways that it can happen.  One way is if the owners decide that they are affirmatively going to seek a transaction.  They look around at their friends or they read reports in the paper of certain surgery centers being purchased at multiples that seem attractive to them.  Or, even if the reports don’t say what the price is, they hear rumors and they think that it may be a good time to get out if the owners are retiring or even thinking about retiring,” Lucas says.

“The other time when people should think about it is if they get an offer.  A lot of people are just minding their own business, not particularly thinking about a transaction, and then all of a sudden, someone starts talking to them about buying their surgery center.  At that point, especially if the price is attractive, the temptation might be to just proceed with the maker of the unsolicited offer.  But, what you also might do is decide that if this is the opening offer, there is probably more out there.  Maybe what you want to do is hire somebody that can package your surgery center and present it in the best possible way to other purchasers.”

Steven Lawrence, shareholder of the law firm Milligan Lawless agrees with Lucas and says that any time that an entity is seeking a potential acquisition transaction, an early engagement of an investment banker can be helpful.  Lawrence says that the benefit is that if a business is in a particular market, industry segment, or stage of growth, that does not particularly have a level of ongoing either institutional or transnational interest, that could really set the market for what the value of the business is.

“The involvement of an investment banker in transaction situations depends on the size of the business, the size of the transaction, and the particular market segment.  In some market segments there is a large, publicly traded batch of businesses that can easily establish a fair market value for the business.  That might not be the best segment for where an investment banker would be needed, or necessary,” Lawrence says.

“However when there is a disparate market, and there might be strategic and financial players that would be interested, an investment banker can help a company navigate that space and create an interest and option that will assist in terms of valuation.”

Lawrence says in cases where sellers work with investment bankers, it is most likely true that the final multiple will be one that is desirable to the seller.

“In the deals that I have worked on, it’s difficult to assess because we would not know what the inherent cost would be if the investment banker isn’t there.  I will say that talking anecdotally to CEOs, boards and entrepreneurs that have been in that position, their assessment was that at least the initial conversations that they were having with the suitors didn’t lead to a valuation that they were particularly happy with.  The engagement of an investment banker and going through the process with them was something that would lead them to get to the multiple that they were looking for,” he says.

Rush explains that this is done through the process of “making the market.”

“There might be two buyers beating on your door and showing interest in buying your business. Well, the investment banker is going to take it to the entire market place at the same point in time and negotiate them against each other.  We are going to be able to maximize the price through a competitive bid approach.  What they are going to do is go through all of these different types of buyers and the different buyers within each bucket type.  They will create a target list, go out to all of these guys at the same point in time, with the same information, and negotiate them against each other, drive up the price in order to be able to maximize the price and your terms.  I use those collectively, because somebody might give you a little bit less money, but the terms would be a lot better,” Rush says.

As far as traits to seek in an investment banker, Lucas always recommends that clients check the references of an investment banker.

“Because the healthcare industry is composed of so many specific sub industries, I think if you were selling a surgery center you wouldn’t necessarily want an investment banker that claimed to have a lot of varied experience in the healthcare industry.  You would rather want an investment banker that has done surgery center transactions, for example,” she says.

“You would want to get a list of transactions that are specifically like your transaction rather than a generalized healthcare transactions list.  Once again, you want to check references.  You would ask for references and you would actually call them and talk about what it was like to work with the investment banker, how knowledgeable they seemed in the industry etc.”

Lawrence adds that the starting point in terms of assessing which investment bankers to be involved with should be starting with the obvious desire of wanting to work with good people and good character.

“From there, I think you would be looking at assessing what their industry knowledge is in terms of background of depth of being able to assess a financial relationship with private equity firms in the space that might have an interest as well as strategic relationships.  You should want to know if there are any pre-existing contacts or relationships in knowledge that a particular firm can bring to bear on both an industry, a geographic segment,” Lawrence says.


If you have an interest in learning more about the subject matter covered in this article, the M&A process or desire to discuss your current situation, please contact Blayne Rush, Investment Banker at 469-385-7792 or





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