Healthcare – DME Industry
Company Overview
With multiple offices, across seven (7) states, this pediatric medical device distributor was searching for an acquirer to take their company to the next level. While simultaneously managing dual careers in the financial services industry and raising a young family, the husband and wife duo founded and initially operated the Company from their Georgia home. Over the course of a decade, the founders grew the Florida-based Company into a highly profitable, multi-million-dollar distributor of medical devices, focused on the pediatric sector. When the owners expressed an interest in potentially selling the Company, their wealth manager arranged an introduction with Aberdeen Advisors.
Challenges
As with any healthcare transaction, compliance, HIPAA challenges, and licensure obstacles were all factors in marketing this deal opportunity. Further, additional key challenges Aberdeen faced were managing the sellers’ valuation expectations, purchase price, and moreover, the structure of the purchase price. The sellers were adamantly opposed to any type of seller note or earn-out. While this is not unusual, the challenge herein was presented by the licenses required to operate the business and the timing of transferring those licenses/changing the ownership with the governmental bodies versus identifying and securing a lender that would ultimately agree to finance the transaction before all of the licenses had transferred.
Coupled with the valuation expectations and financing challenges, the Company had almost 70% third party payor concentration and the sellers would only permit the marketing of the Company to select competitors, drastically narrowing the prospective buyer pool.
Closing the Deal
After dozens of management calls and meetings and receiving more than five (5) letters of intent, the Company was sold to a private investor for approximately four and half times (4.5x) adjusted EBITDA. The owners received slightly less than 90% cash at closing and agreed to hold a very short-term seller note that included interest. One of the owners also received a lucrative, one-year consulting agreement to assist the new ownership with business development post-sale.
Based on Aberdeen’s network of professional partners including lenders, attorneys, and CPAs, Aberdeen was able to connect the buyer with the right lender that ultimately agreed to the terms laid out by the seller. Aberdeen worked tirelessly with the buyer and seller deal teams to identify solutions to the challenges posed on both sides of the deal to ensure a successful transaction. The solutions included an interim management agreement, a lender that understands the complexities of healthcare transactions, a soft closing that allowed the sellers to gain access to the purchase price prior to the transfer of licenses, and an on-going consulting agreement.
