Preparing Your ASC For a Sale – A Beginner’s Guide
When looking to sell your ASC, an owner might develop a feeling of unpreparedness. After all, the whole transaction will probably be the largest deal of its kind for the owner.
While an overwhelming process, selling your ASC doesn’t have to be a process full of confusion and doubt. Taking the right steps to prepare can make all the difference.
First things first, it is crucial for all owners with a stake in the sale to align their goals in the pre-sale process. Everyone’s interest should be taken into consideration, and everyone should be on the same page.
Once this is done, the next individuals who should be considered are the potential buyers, according to Blayne Rush, President of Ambulatory Alliances, LLC.
“Just as you would put a new coat of paint on your house before selling, you should make your company look as attractive as possible,” he said. “This takes time, effort, money and foresight. Making sure your surgery center is as appealing as possible requires us to look at the issue in a multidimensional manner.”
This part of the process might lead to the realization that the center as a whole operates better with such enhancements in place. Furthermore, buyers and investors will find value in this preparatory work as it allows them to get a feel for the right acquisition fit when it comes along.
This stage will allow for a quicker and more efficient selling process, an increase in the general perception that potential buyers have of your center and a deeper understanding of the ins and outs of your business.
It is this last point, that of the business side of an ASC that can sometimes elude physician owners.
“When it comes to buyer perception, buyers are influenced by appearances,” Rush said. “The better prepared you are, the better organized you are and the better you understand and convey your unique message, the better your ASC will look in the eyes of the potential investors. The more authentic and knowledgeable you come across, the more believable your story will be and the more influence you will have on the buyers.”
Management of Finances
A big part of preparing your ASC for a sale involves taking a good hard look at the center’s finances and balance sheets. It is here that buyers will look first and thus where much of the value will be derived.
While historical income statements and balance sheets are set in stone, many people hope to have them cleaned up a bit, according to Curtis Bernstein, managing director of Sinaiko Healthcare Consulting.
“On the balance sheet, common stuff we generally see are payables or liabilities between related parties — perhaps some of the physicians lent some money in addition to equity, and then questions arise on whether it is actually payable or if that can be converted to some form of equity as part of the deal, or how that’s going to come out of the partners’ pocket,” he explains. “Depending on the age and size of the ASC, a lot of times there will be a number of assets that were purchased that may no longer be owned by the center or have been fully depreciated and are now sitting in a storage room, but are still on the fixed asset listing. You’re going to want to spend time reconciling and making sure everything is there to clean that up.”
In terms of the income side of the business, it’s important to get rid of any non-recurring, one-time discretionary expenses and make adjustments. This can be done by creating such adjustments in a separate column on you historical financial statement. In order to keep potential buyers in the loop, add in a footnote explaining the reasons for making the adjustments.
Doing all of this plays into the fact that you should be looking at your finances for the buyer’s perspective.
“You need to understand the assumptions that drive your financial model,” Rush said. “This is very important as this forms the basis for the valuation that will be performed by the prospective buyers and investors. Therefore, you must approach your financial projections from the buyer’s perspective and gain comfort with the numbers, trends and key assumptions driving them.”
The Strive For Clarity
Everything that goes into the preparatory steps you take to selling your ASC should be in line with clearly defined wants, needs and desires that all involved have for the sale. This involves understanding fully what the physician owners’ and ASC companies’ want.
“This will help you get a handle on how you can tell your story — in other words, explain the strategic position of the surgery center in the market place, as well as understand what you need in a new partner and what you want out of a transaction,” Rush said. “I would ask each partner what they want to see in a buyer and what they want out of a sale. This will help with both understanding the questions and with physician buy-in.”
It is also important to approach things strategically. One of the best things and owner can do in this regard is perform a SWOT (strengths, weaknesses, opportunities, threats) analysis of the center.
“A SWOT analysis guides you to identify the positives and negatives inside your ASC business (that is the S and W) and outside of it in the external environment (that is the O and T),” Rush said. “This will help you develop a full awareness of your situation, which can help with creating a plan and making the decision to hold or sell as well as your path forward. You can list internal and external opposites side by side.”
The selling of an ASC or any other type of outpatient center is a daunting task and involves many key players and various contributing factors. However, taking the initiative to perform the proper preliminary steps can make all the difference in the long-run and provide for as smooth and profitable transaction as possible for everyone involved.
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