When buyers put together their advisory team for a deal, they often don’t include an M&A advisor for buying a healthcare business. M&A advisors have the reputation of being more useful for sellers, and buyers think they can handle their work themselves.
While an M&A advisor is perhaps less necessary for a buyer, they can still play a valuable role in the process. Here are a few of the ways this advisor can help when you’re buying a healthcare business.
Lines up suitable candidates
Buyers often underestimate just how much work it takes to find a suitable candidate for a deal. After a few of your prospects fall through, it’s easy to get frustrated.
From past experience, a qualified M&A advisor should know how many prospects on average you need to contact to successfully make a Letter of Intent. This way you can manage your expectations during the search. In addition, the M&A advisor can set up a pipeline of potential sellers for you, especially if the advisor already has an existing network of contacts in the industry. This saves you a lot of extra legwork.
Handles valuations and negotiations
Before you can make an offer on a business, you need to figure out what it’s worth. Otherwise, you risk overpaying which means you’re already starting off in a negative financial position when you take over. An M&A advisor specializes in business valuations and can tell you exactly what a healthcare business is worth based on its financial statements.
This can help during negotiations because the advisor can explain the numbers behind your offer to the seller. This way if the seller has an unreasonable price in mind, the M&A advisor might be able to bring them down to a more sensible level by showing them what a fair market price would be.
Has seen potential problems before
The sales process can be frustrating and complicated. At some point, problems come up and can derail the whole deal if they aren’t solved. Since it’s the M&A advisor’s full-time job to work on deals, they have much more experience than the average buyer. They should have seen most potential problems before and will know how to get around these hurdles to keep your deal on-track.
Lets you focus on strategic goals
For your deal to be a success, it has to line up with both your financial and strategic goals. Financial goals mean how the initial purchase looks as an investment whereas strategic goals deal with your long-term business plans.
It’s hard to find time to focus on both. During the deal, the financial needs are the most pressing and can take up all your attention. As a result, you might fall behind on your long-term strategic planning, leaving you in a bad position when you take over. Your M&A advisor can focus on the financial analysis for you so you can concentrate on your strategic goals instead. This way you will be better prepared to run your new healthcare business when you eventually close the deal.
Don’t underestimate the advantages of an M&A advisor during the buying process. This professional can be an invaluable addition to your deal team.