Top Five Reasons Healthcare Deals Fail

Selling your healthcare business is a major investment of time and effort. If you’re going to make this commitment, it’s important that your deal is a success. Unfortunately, deals do fall through which would mean that all your hard work went to waste. There are a few common reasons why healthcare deals fail to close which you should watch out for and avoid as you get ready to sell.

Unreasonable valuation expectations

One common problem is when the owner of a healthcare business heads into the process without a valuation of their business. They have a “gut feeling” of what the business is worth but haven’t paid for an official valuation. As a result, the seller may have a price in mind that is way off what buyers are willing to offer.  Inflated expectations lead to frustrating negotiations that won’t lead to a sale. Before you test the market, you should pay for an appraisal of your company’s valuation so you know what to expect.  It also helps to review deals that have recently closed to get any idea of what the market’s like. You can find this transaction information on DealZumo.com.

Due diligence issues

Before a buyer can make definitive purchase agreement, they will have a due diligence period to go over your company’s financial, legal and operation details. Of course big issues like pending lawsuit or improper financial practices will certainly derail the process.  However, the due diligence issue that causes deals to be terminated is when the selling company cannot respond to requests in a timely manner.

Before you start meeting with buyers, you should try to get your business in order as much as possible. If you’re working with an M&A advisor, they can go over their checklist of what issues buyers will be watching out for during due diligence. This way you can prevent or at least minimize problems that could get in the way of your deal. DealZumo also has a standard due diligence list to help you get started.

Problem with the M&A advisor

When you hire an M&A advisor, you expect that they will help you close the deal, but the wrong person can actually get in the way. An overzealous advisor can be too controlling over the negotiations and too defensive about sharing information with potential buyers.

This can turn off good candidates as well as bring in buyers who are only going to change their offer after due diligence. After all, they didn’t receive enough information at the start to make an informed bid.

Fatigue

Selling your healthcare business is a big commitment, and on top of everything you still need to run your business. It’s understandable that people get upset, especially when the negotiations ebb and flow. As a result, they call off the transaction out of frustration, sometimes right before they were about to succeed. Every deal has its ups and downs, so expect that selling your business will take some hard work. The main thing is to have a plan, stay organized and stick to a reasonable timeline.

Personality mismatch with the buyer

While a deal can look perfect on paper, it might not close because of a personality mismatch between the buyer and seller. Selling your business is more than a financial transaction. You’re finding someone to take over the business you built, and many owners want to protect the culture they developed, not have it completely replaced overnight. At the same time, you may be involved with running the business after the sale, which would be quite stressful if you don’t get along with the new owners. If you don’t think you’d get along well with a seller, and their goals do not seem appropriate for your business, you should think twice about accepting their offer.

Don’t set your sale up for failure. While there’s no way to guarantee success, avoiding these problems will significantly increase your chances of closing your deal.