Buyer Due Diligence
As a buyer, the due diligence period is the most important portion of the transaction for you. You learn more about your target during this phase — so long as you take time to do the correct scope of review.
Your scope of review should be adjusted based on the scope of the transaction. Is this your first transaction in a new subspecialty or entering a new geographical area? On the other hand, is this an add-on transaction with a purchase price well below your normal size? These two situations will warrant a different diligence approach.
- Quality of earnings reports
- Regulatory risk review and quantify potential liability
- Secure and review all material agreements (payors, leases, employees, etc.)
You’ve agreed to purchas a practice for a host of reasons, most importantly because of the revenue and EBITDA that comes with it. Leading up to a transaction, the practice and its leadership will do what they can to boost EBITDA to make the practice look as profitable as possible, but are you really getting what you think you are?
Our team of financial experts can complete cash or accural based quality of earnings reviews that confirm actual revenues and expenses and proper seller requested adjustments.
Regulatory review should be the single most important aspect of any healthcare buyer’s diligence process. The reality is that all healthcare organizations have regulatory issues that can be corrected — there are just too many for any organization to keep up with. Most practices believe that the rules are only for large organizations, which is the wrong way to approach healthcare regulations.
We complete a deep dive on all things regulatory to mitigate the risk of buying your way into a regulatory investigation. Our review includes questions regarding marketing and referral activities, revenue recognition and collections, billing and coding, and compliance with the various HIPAA and security rules. The stakes are too high to go about this piece alone
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You likely want to roll this new practice into your existing vendor and supplier agreements to take advantage of economies of scale. You could find yourself in trouble – and having to delay some of the synergies your team identified during financial diligence – unless you have a comprehensive grasp on the target’s contractual obligations.
This part of diligence is where we help herd the cats before we start our complete review. We work with your target to track down copies of all material agreements, which is always difficult for practices of any size. Once secured, we review and consolidate key terms and provisions into a single document. Finally, we help you strategize the best approach for accomplishing your synergy goals that are impacted by our material agreement review.
