There comes a time for many people when selling a business is the right thing to do. Last year though, was not particularly the right time for making acquisitions or trying to sell in the healthcare industry.
Healthcare Finance reported that M&As were down by 44 percent in 2020 but Covid may be the kick the industry needs for a spurt in joint ventures. Partnerships may become more popular as a direct result of the pandemic.
However, not everyone wants to merge, and for some this year may be the right time to sell their business off. If you are considering this yourself, then you may wish to read on for an understanding of how to sell a healthcare business.
Why sell a healthcare business?
Most business owners understand the need to have an escape plan. Businesses don’t always last, and of course, personal circumstances can also change.
Running a healthcare business can become a burden or be stressful, especially later in life. And it could be that you are heading towards retirement. Then, of course, you may just have received an offer that you cannot turn down.
It is not unheard of for buy-out offers for medical practices to be made. It is then up to you to choose if you sell or not. If you choose to do so, then you will need a lawyer straight away.
What are the issues with selling a business today?
Selling any business has certain rules and regulations that need to be met, and medical practices have their own unique ones. State laws differ across the country, so you will need a lawyer to help you navigate this potential minefield.
There are many business and legal considerations for selling a physician’s practice, including whether the buyer is legally allowed to own it.
Another area you will need to look at is booking yourself a data room.
Why do you need a data room?
If you are selling your business then you will need to share a number of documents pertaining to the sale. You will effectively be involving yourself in an M&A transaction, and when these are carried out, they generally use data rooms.
The documents shared are invaluable to hackers and anyone involved in industrial espionage. Data that is leaked can affect the sale of an M&A and even lead to financial penalties. Data rooms provide a safe and secure storage area aware from unauthorized parties.
The data room also allows the buyer’s team to perform due diligence before the sale is finalized.
Why do healthcare M&As need due diligence?
When you sell a house, you will typically use a realtor who will help you to market the property. The buyer will employ someone to carry out an inspection to make sure there are no hidden risks involved in the purchase, and the property is worth the asking price.
Due diligence on a healthcare business is a little like this. Checks need to be made to ensure there are no hidden risks, such as debt, involved in the business, and that the valuation is correct.
The difference between selling a house and conducting a healthcare M&A deal is that the documents need to be kept confidential. M&As usually include very sensitive information about companies and their finances.
Any Healthcare M&A transaction requires the sharing of confidential sales documents, and this can be done through a virtual data room.
What does a virtual data room provide?
If you choose to sell your medical business, perhaps to a hospital for example, then you will need to share a number of files.
A virtual data room is essentially a storage area for digital files and can be referred to as cloud storage. Unlike Google Drive for instance though, a VDR will allow you to have strict control over everything.
The hospital will have its own team which may include lawyers, investment bankers, analysts, and others. They will require full access at any time of the day or night to analyze all the information regarding your business.
You, on the other hand, will be able to restrict who can see these files, and what they can do with them. You can also observe what areas they seem to be most interested in. This can help you to be alert to any problems before they arise.
Why will a VDR help you sell your business?
Physically, it would be an arduous task to transport thousands of files and documents to a site for the buyer’s team to be able to review them. There would need to be security, and it would be difficult to control who had access to what documents.
A VDR will let you upload all the files needed, and regulate who gets access without the need to physically move any documents. This allows due diligence to be done smoothly and swiftly. Thus speeding up the sale of your business.
S&P Global Marketing Intelligence reported that early in 2021, M&As in the healthcare sector was bouncing back from the sluggish activity of 2020.
This is excellent news for anyone looking to partner up, or particularly market their healthcare business now. Two areas that are needed for this are good legal advice, and a data room.
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