How to Sell a Health Care Company

Posted by Carl Doerksen on October 24, 2011 at 10:00 AM

how to sell a health care companyOne of the hottest industry sectors for M&A activity right now is health care. Even though there are quite a few variables clouding the horizon (the impact of the Healthcare Reform Act, for example), the reality is the U.S. population is growing older. And as we grow older, the demand for health care services and products will continue to expand exponentially. Right now strategic players and equity firms are both positioning themselves to take advantage of an ever-aging population and the need for health care.

If you own a company that is in the health care field, congratulations, you may be sitting on a goldmine. The first step in determining if your company could be of value to buyers is to hire an M&A advisory firm. In some industries it is quite possible to sell your company for the most profit on your own. However, in the health care field, the complexities of the deal almost make an M&A advisor a necessity. There are several compelling reasons why M&A advisors are vital to closing optimal deals in the healthcare field.

Knowledge Based on Completed Deals

The first is experience. You are an expert in your niche of health care. You have successfully started and grown a company in a very competitive field. However, you are not an expert in selling companies—you will probably only sell one company in your entire life. Do you really want to “learn on the job” as you are marketing your most valuable possession?

If you are like most business owners, a significant amount of your personal net worth is tied up in two items: your home and your business. If you use a real estate agent to sell your home, you do so because of the person’s experience and skill in selling houses. The same is true of using an M&A advisory firm. Find a firm that has successfully sold businesses and chances are good you will find an optimal buyer.

How Much Free Time Do You Have?

Time (or lack of time) is the second reason to use an M&A advisor when selling your health care company. Closing a deal is more than a full-time job. We estimate that if you try to sell your company on your own that you will spend at least 1,000 hours doing so over a nine- to 18-month period.

Since you are probably working more than full-time running your company today, chances are good that you simply don’t have the hours to spare to effectively market it. An M&A advisor will do the heavy lifting, allowing you to continue running your company. And that really is key. You need to maintain your company’s growth and profitability during the marketing phase in order to ensure that you are hitting your projected numbers while buyers are looking at you. Having an M&A advisor working for you will allow you to do so.

Know Your Company’s Market Value

Before going to market you will need to have a good idea what your company is worth. If you don’t know what the economic value of your company is, how can you know which offers to accept? This is a fundamental reason why you will need an M&A advisor: They will provide you with an objective, third-party evaluation of your company.

As we have discussed before, the evaluation phase of the M&A process is extremely vital and very complex. Most business owners that attempt to sell a company on their own end up using old rules of thumb that they have heard discussed at association meetings. Although sometimes these models can be accurate, they usually are not comprehensive and may not address the key strengths that are unique to your company, which is why hiring a professional firm to value your business is absolutely vital.

Contacts, Contacts, Contacts!

But perhaps the most compelling reason to hire an M&A advisory firm is the reach and scope of contacts that they will have (assuming you hire an M&A advisory with extensive experience). At the outset, if you are like most business owners, you will make an assumption regarding who the most likely buyer will be. However, an experienced advisory firm will go beyond that assumption and will expand your buyer list to include companies and targets that you may not have considered in the past. This is a key strength that they will bring to the table for you. The contacts they have in the buying universe far surpass any list of possible contacts that you may have. This is vital in finding an optimal buyer for your company.

More Information to Consider

These are just a few of the reasons why you should hire an M&A advisory firm if you are considering the sale of your health care-related company. There are lots of others but time and space do not allow me to list them all.

If you would like to learn more about selling your health care company, I would invite you to attend a Generational Equity workshop. We hold these around the country and they are designed to help the middle-market business owner learn more about the M&A process. The investment of your time will be well worth it. If you would like to see if you qualify to attend, please click here for a no-obligation consultation with one of our professionals.

The bottom line is this: Don’t attempt to sell your company on your own, especially if you want to maximize the value through a professional marketing campaign.

© 2011 Generational Equity, LLC All Rights Reserved

Topics: selling a business, exiting your business, finding a buyer, selling your business

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