Consider your buyer’s interests when undergoing an acquisition or transaction
by Bradley Smith

The DME marketplace has been a roller coaster for several years—which means there is plenty of peril and plenty of opportunity. Even when you find a good prospect, buyers will be exceptionally wary and vigilant due to the changes and ongoing uncertainty in our market. Whether you are considering selling a company or division, or borrowing or raising capital for an acquisition, transactions run smoother when you are able to show the value. One way to address this is to make it easy for potential buyers or investors to look beneath the hood and see the value. The following are some ways to clearly show value. Provide timely financials with clear notes regarding any unusual occurrences, including balance sheet items (long-term debt). A trailing 12-months profit-and-loss statement is most relevant with assets that are on the move. If you’re planning to sell, it should be clear which assets are (or are not) included and the rationale behind this decision. This includes inventory. It is common for unopened inventory to be an additional transaction, while uncapped rental items such as oxygen concentrators are included. Every business has a story. Make sure yours is well documented. Include the ups and downs and any hiccups. Make sure your story matches up with your past, current and anticipated future results. If you’ve had to make any tough choices, what were they and what were the reasons for acting? If you can measure the impact, what was it? These might be both internal (reorganizing your team) and external (dropping a payer source where you could only lose money). Show how you have managed your cash and any steps you’ve taken to improve its flow. Know your managers well and identify which ones could best help a new owner succeed. Use caution when proceeding to introduce any employee to the idea of a divestment. The seller needs to clearly understand their goals and objectives for the sale, whether financial or otherwise. This type of clarity may eliminate some buyers, but is attractive to focused buyers who want to know that the investment of their time, especially in due diligence, is well spent. It is essential to recognize what buyers are looking for in your marketplace as well as the relative value of your company. This allows you to anticipate questions, to respond with integrity and maintain a comprehensive view of the opportunity. Understand the process of selling through a typical transaction. You will be able to increase your tactical flexibility when questions and offers come your way. There are several helpful books on the market that will familiarize you with the process. Buyers see this as a value increase for them and it adds an element of trust to a relationship that could be challenged in due diligence. When you are prepared to give buyers critical information in a usable format (trailing 12-month [TTM] P&L activity in an Excel spreadsheet), you increase the ability of the buyer to acquire you. This is particularly true with larger buyers who may have to make their cases 
to more senior executives or internal M&A committees. Because the buyer is ultimately focused on the future, provide information that helps them to better see the future opportunity. You can project the impact of other opportunities that will increase your value. This is especially important if your results are stagnant by choice, or you are managing a rocket ship, in which future economic outcomes will clearly surpass the results of the recent past. M&A advisors (brokers) talk about looking through the buyer’s eyes to widen your perspective while maintaining your stance. There is a balance between appreciating the perspective of another, while not necessarily agreeing with the buyer’s view. If you try to maintain the balance, it increases your likelihood of a successful transaction, just as it would in any successful relationship. Often, this balance is too difficult for an owner to manage while maintaining a business. The closeness can skew his or her perspective. I encourage an intermediary. Whether a trusted council or an M&A advisor, the individual needs to have knowledge and experience in your geographic market and, more importantly, your DME or specific health care market. This intermediary will make the difference in seeing a transaction come to fruition, instead of wasting time and resources chasing an unrealistic dream.