Looking To Sell? Five Things To Know About The Current M&A Market with Paul Martin, PT

Paul Martin has been dealing with mergers and acquisitions in physical therapy since the turn of the century, so he knows the market. However, things are different now than they were even five to eight years ago. Today, Paul shares what you need to know if you’re looking to sell in this environment, and what you should know about the current industry even if you’re not thinking of selling. As an independent owner, you should recognize what’s going on in your local PT space – who is getting acquired, what acquiring companies are looking for, and where they might be going next. These are things that will keep you abreast of the industry and where you fit so you can make sound decisions. Even if you’re not looking to sell, consider some of the things discussed here so you are maximizing the value of your practice and be ready to sell at any given time. You’re going to exit someday, so be prepared.

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On this episode,  I get to talk to industry veteran, Paul Martin of  Martin Healthcare Advisors . He  has been around since the early  ‘90s. He  has been advising physical therapy companies since 2000 with Martin Healthcare  A dvisors. He’s helped  over  thousands of clinics both grow and merge and be acquired or acquire in the physical therapy space. He’s been around the block a number of times and  now,  he has five things he wants us to know about the current  M&A  market . T hose five things are important to know because things are different now than they were  several  years ago. T here are significantly more players, more acquirers in the market space  and  some of them coming in within  2018 ,  a  number of private equity groups on top of the ones that are privately held and large, but also those are their publicly held.  

Things are different. It’s not all about  EBITDA  anymore. There’s a lot to do with what’s your growth strategy? What are your cultures like? How do you fit in their footprints because some of these are regional players and not national players? Do you add something to the space that they’re trying to get into or increase a footprint or provide a niche service? Are you on a growth trajectory? All of these things are what they’re looking for and provide greater value to them. There are things that you need to know in order to provide more value for them as well as provide more value for yourself. I’ll continually beat the  drum  ever since I did the interview with  John  Dearing   last year as part of the podcast about how to set yourself up to sell . D oing some of those things to improve the value of your clinic to sell are the same things that improve the value, the profitability  and  the power to   improve your clinic currently . D oing some of those things improves the stability and freedom that you get to enjoy.  

These are things that are somewhat simple, fundamental, but also take some effort and if focused on increases the value of your clinic .   T hings such as making sure your legal paperwork is in order to make sure your financials are in order and easily accessible and easily readable. Know your statistics, especially your cardinal’s statistics. Make sure you’re on a growth trajectory year over year. Do you have a leadership team in place so that you’re not the sole decision – maker and not the sole influencer in the company so that if and when you do leave, things will continue to run well and continue to grow?  

What is your culture like? Do you have  a  mission statement and values? Those things are important because if you’re looking to sell, you want to make sure you sell to someone who has that same value system in place .  It makes things so much easier when you do and  it  allows for greater growth even after the acquisition. There are a number of things to consider. Paul goes over the five most important things to understand in the current market.  I’ll  continually beat the dr um  on making sure that you have your company set up for sale at any time.  It  increases the value of your company and increases the power that you have independently. Let’s get to the interview and see what Paul has to share.  

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I’ve got  Paul Martin of  Martin  H ealth c are  A dvisors  on with me for the interview. Paul has been around the block a  number  of times and is doing some great work now for the profession. First of a ll, Paul thanks for coming on.  

Thanks for having me ,  Nathan.  

If  you don’t mind, you’ve got a wealth of experience based on your time  in  the profession. Would you mind goin g back and sharing your story first of all  and tell us about your professional path and wh at got you to where you are now?  

I am a physical  therapist by background and I started a company  a  few months out of school  back in 1989 that was called  Physical Therapy and Sports Services . I  and two partners grew that company.  I t   started driving growth in 1993 when we had t hree clinics and from  ‘ 93 to  ’ 96 . W e really accelerated that growth and we grew to  21  clinic locations . S ubsequently , we  sold that company to  NovaCare  in 1996. I  spent three  years with  NovaCare  and  it  was a great experience. I felt I got somewhat of a  degree in corporate rehab . I  learned a lot from the folks at  NovaCare . I  left  NovaCare  in 1999 and started this company, which is a company that provides growth and development consulting in the industry as well as merger and acquisition representation of companies that want to go into the market.  

W ho’s your ideal client at this time?  Wh o are you targeting?  Y ou might be helping those guys  toward the end of their  owner ship phase. W hen you talked about growth and consulting, who are you targeting there?  

We  w ork with companies of all sizes ,  a nywhere from a single location company.  As  we look at our client base, there seems to be a look in the eye of our customers of wanting to learn more about the business of physical therapy, wanting to grow their practices and seeing that in their markets that in order to remain independent, it’s necessary for them to continue their growth .  

What are you seeing there when  you say in order for it to  be necessary to be independent?   You’re  recognizing that in order to stay  independent ,  you need to have a larger footprint or  you need to be at a certain size compared to the hospital networks or the physician – known physic al therapy clinics and whatnot.  

Most markets, t he large national companies in just about every market in the United States are coming into those markets, acquiring the larger practices  are  puttin g a lot of capital into growth  with new clinics, new startup clinics.  W e really advocate if you want to remain independent , you  need to be consistently looking at   good solid growth oppo rtunities within those markets.  

You’re  not only helping people who are growing  in that respect and trying to  either open  de novo  or acquire other clinics, but you’re al so  focused on  helping those who are trying to exit their practices as wel l. That’s   a little bit about what  we’re going to get into  now , right?  

Absolutely . We  have a whol e division of our company that  take s  some advant age of this current market  or have looked at it as a strategy to transition the ir company to a larger business  in many different shapes and sizes .  

What  are you seeing as far as the market?   It seems like there was a pretty hot run there for the last five years. Do you see us on the downhill side of th at or do you see it continuing  in the expansi on of mergers and acquisitions?  

Based on  the capital markets , based on  the continued ability for private equity to be able to borrow at very low inte rest rates, but as you look at our economy, etc., we do believe that this market  may have hit its peak and every time we get there , we’re seeing n ew private equity groups coming into the market . This is  a very long haul for  a market to stay as aggressive  as fertile as this market has been in the rehab  industry. How long will it continue?  It’s v ery difficult to say, b ut for right now, there  are  great opportunities.  

Definitely  and I think I learned that  from one of my episodes last year from John  De aring .  M aybe I’m going out on a limb, but some of it might depend on simply those interest rates as long as money  i s easy to borrow.  Mergers  and  acquisitions might be pretty ,  I wouldn’t say  a  hot thing , but  it’s been active.  

W hile the interest  rates are definitely a driver,  the other driver is private equity seeing this business   as the reh ab business as a good business  that they see it as a fairly simple business. They look at it.  T hey don’t see that our reimbursement over the last  ten  years or so has seen that much change.  I’m n ot saying it hasn’t seen any change, but that much change. There  haven’t  been any major changes to our market with any type of regulatory  issues that have come up.   The public companies, US   PT, as  well as  S elect  M edical have fared very well in the public eyes .  I t brings attention to our industry  and  the private equity sector seems to be  very much of  a copycat industry . W hen one private equity group  has success, it’s not long after that another private equity group is  going to follow that group trying to  do the same strategy . W e’ve seen that happen over and over again to the point where there are literally  eighteen  bonafide  private equity groups backing fairly  large rehabilitation companies in our current market. It’s  up from  six or eight along with the public companies . It’s  really moving fast.  

The private equity sector is a copycat industry.
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With  so much private equity coming into the marketplace, how are things different?  Maybe that  leads into a li ttle bit more of our topic. How  is the market different for the physical therapists who are looking to sell now compared to  several  years ago?  

It leads exactly into what we wanted to talk about  which y ou’re exactly right. It’s what we’ve come up with   which  are  the  five things you ’ve   got to  know about the new  rehab M & A  market . It  s eems like we have a new market  really on an annual basis.  There  are   so many changes that the market continues to go through this evolution.  The f irst thing  you ’ve   got to  know is th at we’re no longer in a market  where you can simply sell when you and your business are ready.  Historically ,  it was  back in the days of three or four acquires in the country, business owners would get their business in good shape.   They would be ready personal ly and they would go out to one,  maybe two or three of those companies and  you could get a decent deal.   You  could sell your company  on your terms at your timeframe . It’s   n o longer like that.  W ith 25 plus companies, you ’ve  got  eighteen  private equity – backed companies. You have two publicly traded companies and at least five other fairly large scale private companies that are all vying for market share within these markets.  T hey’re all at such different stages that  t he market will dictate when you’re able to get a good deal for your company, not simply your evolution . T hat’s one of the things that has changed about this current market .  

A re you saying that if you’re an independent clinic owner at this day and age, should you be ready to  sell at any time ? W hat would you recommend my  readers  do if their practice owners, especially if they’re later on in their ownership and they’re looking to phase out mayb e in the next five to  ten  years? W hat would your recommendations be?  

It’s   really important to, on a very routine basis,  every few months or so to p op your head up and survey the  market around you to see ,  who are the companies that have made acquisitions in your  market ?   T he co mpanies that already made  those acquisitions, what is their activity? Who is around your market that may be looking and would be the next likely kind of suspect to be coming into your  market?   To   understand  based on those companies and their evolution within the private equity  investment of those companies  the  best  time whe n you have what they need ?   Y ou’re going to get the best deal when you match what they need with something that you can bring .  

How  does an independent practitioner,  working in quite a bit  treating patients or working on their business, where would they go to find those kinds of resources that would tell them who are the active players in my market  and w ho’s coming into the market ?   B ecause  they’ll acquire businesses but not necessarily change the names at times so it might hard for them to find that  out?  

It’s  important that you find someone that lives in this i ndustry and understands , especially the larger companies they believe and somebody has told them that you need to use  and  find a  large investment banking firm ,   may   be ou t of New York City in order to  properly se ll your company. The problem  is that those companies don’t know who the buyers are in this market.  These  are all privately held companies. Even those backed by private equity are s till privately held companies . T hey’re not making pub lic announcements, they’re not being vocal  as to where they’re going next and what they’re going to be doing next . You ’ve   got to find somebody who lives and breathes in this market  and  understand s  who they are.  

It’s someone like you or maybe  a local broker that’s in this industry  or p eople like that.  I t’d be hard I’d imagine   as  an  independent guy  to find out all that information. I c an see where it’s important . I n  my experience, my partner and I ,  had three or four offers over the course of a  number of years that c ame to us from different directions.  There  are  plenty of friends that I have that have clinics that have never been approached whatsoever . I t seems like it’s hit and miss as to who  you know or not,  what  you know  and that kind of stuff . I t’s important to be connected   with guys like you that can guide you a little bit.  

We believe it’s a big value.  

H ow should an owner establish or set up their practice to get maxim um  value? M aybe that leads  into  the  next  part a  lot of times they’ll talk about EBITDA and whatnot and how tha t drives the value of a clinic,  profits, gross revenues or growth in general. What are some of the things that we should be looking out for to maximize our value?  

A s we’ve outlined , I  think the second thing that you need to know about this market is that the deal value drivers have  changed. What I mean by that is in the past it  was,  everybody used  and get  five multiple.  T hat’s what everybody should be able to get  and  everything was about EBITDA . I ‘m not downplaying that EBITDA is not im portant. It still is important, but  the biggest driver that we’re seeing in  this  market is the competition for your business . W e  coin ed   your EBITDA plus who wants to be in your market now ?   W ho needs to grow in your market, who needs a platform in your market now, who’s out there that would be the  best fit ?  That’s where you get  what we would describe as the best deal.  

You’re talking about  maybe being aware of where the companies have a footprint in your geographical area and see if maybe you fit well into that footprint or you provide a niche service that cou ld benefit a player in the area .  

A s  well  as being able to provide that potentially i n some very unique ways to a n um ber of those companies  where you  have a n um ber of companies looking to get into your market for different reasons. You have attributes that may look so lid and may look  attractive to a  number  of companies then it’s th e competition for your company  all in what we would call a synchronized competition all done confidentially. That’s the process that gets and drives what we see as the best deals in the market.   

If you don’t mind, I ‘m  going to  use a personal example.  When we sold our clinics  and formed E mpower PT , i t provided  a nice footprint for the private  equity firm in the Phoenix Metropolitan A rea .   I f  you were a business looking to possibly sell in maybe Tucson or  N orthern Arizona or maybe even  S outhern California, that’s where you might be a value add to a company that’s  looking to acquire businesses.  

M aybe an in – state business that’s looking to go to a market that you serve in – state or potentially if you’re large enough ,  other companies looking to come into a state and compete,  you  may be able to provide something unique to each of those  companies based on their needs.  

A lot of people talk about  establishing yourself  and with your experience working with  growth and consulting  in M & A,   how  long does it take for the m to get their business  into a good position to get  the  maxim um  value out of their clinics?   I’m of the opinion that it takes almost a year, maybe two  years to ship things up  to put yourself out in the market.  What’s your experience in that?  

The biggest driver that we're seeing in today's market is the competition for your business.
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Our experiences that depending upon  where the business is in terms of its metrics ,  in terms of whether it has a compliance  program, in terms of where the EBITDA is  and  in terms of its ability to grow.  As  long as all of  the things within the company  are ready in this  current market to do it right  and to go out to multiple companies, the process that seems to be most effective   is put everyone on the same starting line at the same time and drive a process that requires them to stay within a timeframe. You’re going to quickly eliminate those who aren’t interested or may have their focus on something else at that point in time  and then driving  that . W e’ve seen it in a range of four to six months, which is much better for the business for much better ,  for the business owner than going through  a process of  working with this company for a couple of months, seeing what you can get then walking away from them possibly and go into another one. We see a lot of this  franticness  of ,   “ I ’ve  got to talk to everybody ,”  and by the time you go through all that, it’s a year later and wh at have you accomplished? When the business is ready,  what se ems to be most effective is to  put everybody in the same  starting line at the same time.  

If I  have a friend who has two and going on to three clinics and he’s looking to sell in about five to seven years  but  he doesn’t have policies and procedures in place. He doesn’t have an employee  handbook .   H e’s  been working full – time most of the time   and now starting to pull out of treating full – time. How long would it take a guy like that to get  ready to even go on the market?  

We see a lot of companies like that, as being a practice owner .   W hen you get to that, it’s  a  no man’s land .   T hat two to three clinics to maybe five to seven clinics and have you set up the management structure, have you set up the systems and the processes for the company to continue on profitably ?  To do all of that and to set all of that up again, depending upon the stage of the business owner .   A lot of motivation to want to focus on and work on their business ,  t hat could be a one to two – year process to get all the things in orde r  to be a business that has the strong ability to grow.  

What  are  acquiring companies looking for? You talked about something that maybe adds to the value of the company, whether it’s in the geographical space or whatnot trying to enter a certain market. What are some other things they’re looking for when they’re looking to acquire companies?  

D ifferent from our previous timeframes and previous markets, the third thing you must know about the new M & A rehab market is that right now it’s very attractive to a buyer if you are what we term as growing through the deal. What we mean by that is   historically it was all right, I’m going to pull back and  try to do everything I can to maximize my EBITDA .   M aybe  pare  down a little bit  and c ertainly not do any new startup clinics  and  not start anything that would require any investment. Don’t make any changes  and  just pull back.  

In this current market that will not make you attractive to the acquirers in this market because they want companies that can grow. They want companies that have shown the ability to grow . Th ere  are  a number of different ways in order to look at some of those attributes and look at some of the expense  you may have incurred  to start a new clinic or an investment that you’ve made. Ways to structure that within deal companies that have shown the ability to grow and appear to  an  acquire r  as we are growing our company and we are managing our company as though we’re never going to sell it. That’s attractive in this market.  

That can be tough because when you’re growing like that, it can take a significant amount of cash to open up a new clinic or to acquire a clinic and then that’s going to negatively impact your financials, which the acquiring companies are going to be looking at.  A t least through my experience, they can understand that cash is currently going towards opening a new clinic ,   b ut it should look at as a positive when it comes to the acquisition.  

It needs to be a balance and that balance needs to make good business and strategy sense. If you’re throwing every bit of capital you have and at a new startup clinic and the startup clinic takes twelve months to go positive cashflow, those are not good business decisions. You need to continue to have  a  balance between growth and margins  and y ou’re  correct ,  the acquirers understand that growth takes  the  capital .  T here’s going to be added expense on your P & L because of that.  There are  usually many ways to adjust that as well as look at  the  structure to reward someone for the fact that they’re growing. We say this all the time ,   w e need to be the train that’s leaving the station and who’s going to jump on.  

They’re going to look at your EBIT D A still, but they’re also looking for growth. They’re looking for what kind of value you can add to their marketplace . Are  there are some other things that they’re looking for when they’re assessing your companies?  

Companies that are able to drive for their markets at or above the benchmark level of cash per visit are very attractive to a buyer because it means that you’re managing  e fficiently  and y our staff is productive . T hat’s real attractive versus them looking at this and saying, “ W e’re going to have to teach that staff how to bill correctly  and  how to charge for everything they’re doing . ” These companies  a re moving at such a rapid pace that they’re not looking for turnarounds.   Many times a business owner will say, “Won’t the acquire r  see that has great upside opportunity for them?” They will, but you may never get to the finish line of the deal . T hey’re in a neighborhood and you’re  a  broken – down house that needs all the fixes and  there are  three shiny new houses in your same neighborhood and you don’t want to be left behind.  

They’re not necessarily at this stage looking for something that they can fix up and they’re going to have to take some time and invest money and effort into. They want to acquire something that adds to the bottom line and move on to get the next acquisition.  

We’ve coined it as speed dating. They  a re moving quickly and they aren’t going to spend a lot of time on a deal that looks like a turnaround they’re going to focus their efforts on, because there  are  a lot of companies that have put their hands up  that are  in the  pipelines of these acquires.  

Where do other things come into play,  especially as a clinic owner?  How important is it for the independent clinic owner to have a mission ,  purpose and values all established and maybe having a particular culture of some kind ?   D o acquiring companies look at that?  

It’s  important and we see it as even  more important for the seller. In  the current market, many of the companies are offering a structure of a partnership . I f I’m  going to  go out and find the right partner as you just described, culture is important . I t’s important to identify with what is your culture and what’s the culture then that you’re looking for your company to continue to thrive  and  n ot every acquire r  brings that. T hey don’t all have the same cultures. They all  have  different and  unique culture s.   W hen we look at  and  talk to companies that are looking to potentially sell their busi ness ,   w e  say , “Y ou may not want to hear this, but it’s not all about  the  price. ”  Cultur e is first and foremost  as what we see in this market  that  becomes most important to a seller. They’re going to be in there for a long time and they’re going to be working along with the acquiring company for a  number of years.  It’s  important, especially if they’re going to be in a partnership and they have equity and they can benefit from growing that business.  

F rom personal expe rience,  there was an opportuni ty for us to interview  seven to eight different acquiring companies as we were on the  market.  I’m talking about this second hand  because  my partner was on a lot of these interviews while I was up here in Alaska .   H e said it was obvious as they sat at the table that things just didn’t align. It didn’t feel right. It seemed their focus was someplace else,  whereas our focus was over here.  I think the initial take is that  they’re all the same. These  are all the same companies that are trying to get into  the  physical therapy market. They probably have the same values ,  whe re that’s not the case at all. They  have completely different values, different objectives  and different  mission statements so as the seller, it’s highly important that you have  all that established and that you know  what your ideal acquirer looks like. You should probably have a good idea of who you’re going to marry before you marry them that leads to a happier relationship down the road.  

There is no question, y our perception of that  a s you were going through this is dead on. W e do this a lot so we see  it  over and over agai n. W hen y ou can sit for three days, the owners  of  the business  and we  together  met with seven different com panies all within a matter of  three days and asking a lot of the very same questions to each of them . Y ou’re exactly right . T hey came out with at least four of those companies. There’s no way they said that those companies would meet what they were looking for in terms of culture. The other three  have  different attributes and that’s where we star t looking at what we see  i s  the next element that drives the  best deal, which is structure. This  is n um ber four things that you got to know about this market, which is  there are  so many different structures in t he market  now. T here  ha ve  been five private equity groups that  have gotten into this market within the last nine months.  T hey all can come in and keep doing the same th ing as their competitors. They  have to bring something different and unique.  

Wh at we’re seeing is they’re bringing some unique structures on how the equity in the future will be paid to the s eller  and  where that equity is placed .   S tructure is  right behind culture  we  say  this, “ Yo u name the price, I’ll name the structure  and I’m going to win every time .”   In  t his market , t hat’s true. We   line it up in a matrix  and look at simply price. Many  times when you look at the real value of everything that ‘s going into the deal, it flip – flops in terms of where you’re getting the greatest value based on the structure.  

The  people who are se lling need  to know that there are different ways that they can get paid out. Is that what you’re saying? That the structure of the deal could be no cash? It could be a percent age now and a percentage later? What are the expectations o f your job after the fact? Is that what you’re talking about when you talk about structure?  

Yes. There was  a  partnership structure .  US   PT was  on the forefront of the partnership structure and they’ve u tilized  a partnership structure certainly with their acquisitions as well.  T hat partnership structure has been sliced and diced in multiple different ways  from  newer companies, the new  private equity that has come in ,  in  order for those  companies to try and stand out. A big piece of it is not that you’re not getting  a good portion of what you’r e receiving for your business upfront ,  but  how can we structure that back end to make it attractive  and  to make it secure?  That’s where  it can  be  fortunately and unfortunately.   Fortunately  for folks like us  and  unfortunately  for sellers in the industry ,  it has become very complicated.  What’s  always a good structure for the acquire r  may not be the best structure for the seller  and  it’s that work on the backside of that .  T ypically ,  it’s with the equity and where the equity is and how you get it out. That is  important in  this  market.  

What’s the fifth thing we must know?  

We call the fifth thing  of   market separation. W hat we mean by that is in this current market ,  you  have  multiple acquires and they’re all at different stages of their growth . T hey’re all seeking markets regionally based on  the  evolution of their growth. For  example, a company that has been backed by either new private equity or our first round of private equity.  Once  they get their structure in place, they’re going to be looking to grow . A t year three, four , t hey may be looking to wind down somewhat in order to prepare for the next private equity investme nt. Companies  th at become what we call recapped, a   new private equity group comes in and takes out a smaller private equity group.  A ll of a su dden ,  you have a geographical  need in which as opposed to staying somewhat regionally, we see those companies and we  call it leapfrogging.  

A company  that’s primarily New Jersey, New York, all of a sudden they’re doing an acquisition in Illinois, Michigan and Louisiana.  This  is  what we call market separation  which we no longer have one big market with just a couple acquire r s .   T here  are  segments of markets across the United States and they’re all different based on who the acquirers that are looking to get in and what stage in their evolution are they in  and it  changes.  W ith these new private equity groups, a lot of them  are   W est Coast-based .  I think you’re going to see a lot of platform acquisitions on the  W est  C oast.  We  were  a part of one of those . W e’re  seeing some  E ast  C oast acquire r s and it’s slowed down now gearing back up wit h some higher – level management,  etc. They’re going to look to  jump  b ack into the acquisition game. It  causes what w e call this market separation which is,  it’s so interesting and  cool when you can look at it  from the United States view.  If you’re in a market, you’re in Pennsylvania,  to see all of that,  it is  difficult . It  has made it somewhat complicated.  

There must be balance between growth and margins to make good business.
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As  a seller, the important takeaway is to recognize where these acquirers are coming from. Do they have a national footprint or are they a more regional player?  At w hat stage are they in? Are they three year s into this acquiring phase  or are they brand new? Is that what you’re saying?  

Exactly ,  and a re they  looking for plat forms? Are they looking for add- on acqu isitions? Are they looking for  niche pra ctices within certain markets? You coined it  pretty much dead on.  

There are   a  lot of takeaways.  Those are  valuable  information  especially if they’re considering to sell anytime soon .   I f they want to get an idea  of what the market looks like , i t’s important to have all these factors in mind.  Are  there any recommendations that y ou make to a guy who ’ s like, “ I’m not  in the market to sell.  I’ m  relatively new in my practice and I could be here for another  twenty years and maybe grow  with a couple  of  clinics ? ”  

You   want to make sure that as you grow your business and  if you’re on the  very frontend of your career,   the  reason private equity is investing in this business is  that  it’s  a good business to be in.  W e work with companies across the country that are looking to remain independent in their markets. The keys to that are   knowing and understanding what’s going on around you, but looking to find and to capitalize on market niches that are  focused   on  things that you serve those people better .   You  double down on those specific market niches that you can serve because you will typically be able to serve them better tha n the large companies. Being  and  li ving in your own market and  in many cases, h aving grown up in that market . G oing out and finding those market segments that y ou can serve better is  I think  one of the first things that  we talk to compani es about as they’re looking to  evolve within a  market  looking to grow.  

It comes down to solid  blocking and tackling . You are  making  sure that  you’re establishing  operations and financial bud gets . You are  making sure that you’re  lookin g to grow your staff in a way .   Y ou’re looking to evolve leaders in your company  and  continuing to  provide the best service of any company in your market  or  state  and  active in your community. Don’t  let anybody out there tell you that just  because such  and such company did an acquisition in your market that you’re not going  to be able to survive anymore  and y ou  have to sell to one of these companies.  No, that is not the case at all.  

I had  a  guy  John  De aring  on  and w e  talked about what to do to prepare to sell. The big takeaway for me was that even if you’re not looking to sell, being ready at any time, having your house in order per se, to be ready to sell at any time typically means you’re profiting the most. You’re runn ing at peak performance anyways. A cting as if you were on the market can definitely lead to bene fits as you said,  having a leadership team wher e you’re not the sole focus  of management and leadership for your company. Having set policies and procedures, having clean books have  an operating budget .   H ave your compliance manuals together  and  your policy and procedure manuals together  be cause they’re  going to  look at all those things.  E ven if you weren’t selling, having all of those things in place makes you a more profitable company and  it  improves performance.  

W e’ve seen companies have great success who e arly in the game  ha ve said, “ I wonder what the value of my  company is  now  in this market . ” What that does is  it makes it very clear internally what some of those value drivers are and can help guide decis ion making  in the future . If  you’re looking to provide value so that you can pass this along to your children that may go into physical therapy or you’re looking at some point in time to transition out of your company.  We’re  all going to leave our companies at some point in time.  U nderstanding what that value is and what the internal value drivers are I think is also a good step to take early on because it will also uncover some of the things that you just said.  

Do you  have that compli ance program in place? Are you r   financials in a structure that’s going  to be easily   assessed by acquire r ?   Are  your leases  in a structure? D o you own buildings  and how are you dealing with your building ownership? I s that ownership in your company or  did  you put that separate ? Are you  running fitness programs and other programs that  also under a structure,  should be looked  at and done differently ?   I think it’s important early on to prepare your company for that value l ook later on and whether that’s  passed down to your staff, your children or going out to a third par ty . It is  important.  

I love  that you tied it back to value. I f we use them what increases our company’s value as a decision filter, then that would lead our decisions to improve our value  and  improve our profitability.  

P rofitability is important, but  as you look across the company, it comes  down to profitability and risks. W hat you want to d o is to look to minimize risk by  having a very diverse referral base, by having a pay er base that’s fairly diverse versus  one sin gular payer base, a payer that  may be federally funded, th at could be changed overnight. A s we look at our staff and the arrangements that we make with our staff, as we look at our management structure, everything we  do, you want to look to build solidly which reduces risk.  

Is there a nything  else you want to share with us,  Paul ?  

This  has been great and I  appreciate you having me on.  I hope this has be en valuable to your  audience . As I said before we got started,  you’re doing a great thing f or our industry and I  a ppreciate that.  I’m glad I found you and I’m glad I was able to get on and talk to everybody.  

T hanks for your time. If people wanted to reach out to you, how would they do that?  

You can send me an email. That’s  a pretty long one, but i t goes right to our name. It’s  PMartin@MartinHealthcareAdvisors.com  and certainly  jump on our website to see  what we do  and how we do it, which is  w ww.MartinHealthcareAdvisors. c om .  

Y ou’re going to be presenting some of this information in the future  w hether that’s at PPS or other conferences.  

We are.   We  did mergers and acquisitions  conference  that is  called Better Strategies for Higher V al uations. We did that in Chicago  back in early June and w e’re looking to do another one  right before the  Private Practice Section Conference  on  October 29th in Orlando. W e’ll be sending out invites for that and it’s a nice way to start the conference. We’ll do  a five-hour  teaching a training session and then that would be followed by dinner and it’s a great time to network with other business owners across the country.  

If  people were looking to go to that meeting the day before PPS, do they go to your website or do they reach out to you individually? How do they do that?  

We’re  going to be sending invites out . C ertainly send me an email, tell me you’r e interested and we will make  100% sure you get an in vite and you’re able to attend.  

Thanks for offering that and being a resource in that regard again .  T hanks f or your time. It’s been great g etting to know a little bit more about the  M&A  market.  

Nathan,  it’s  great talking to you.  

Thank you.  

The post Looking To Sell? Five Things To Know About The Current M&A Market with Paul Martin, PT appeared first on Physical Therapy Owners Club.