In this video, Gary W. Herschman, JD, discusses how physicians can maximize their transaction value by practicing due diligence and getting their practice in order before considering a private equity transaction.
“If you are presenting yourself to be valued and potentially be purchased or partnered with a larger organization, whether it be private equity or otherwise, you’re going to be under the microscope,” Herschman, an attorney in the health care and life sciences practice of Epstein Becker Green, told Healio. “Your practice will be under the microscope, and there will be comprehensive due diligence.”
Herschman noted financial books and records of the practice should be solid and come across as professional. He added practices should have a corporate compliance program and perform monthly exclusion checks on their employees.
It is also important for a practice to have an advisor and accountant who understand what a potential investor is going to want to see in a practice, according to Herschman.
“By doing that, it gets your house in order and it does maximize your valuation because if a potential partner comes in and sees a lot of holes, that’s going to raise the risk profile of your practice and reduce the valuation,” Herschman said. “A lot of groups don’t want to invest in this, but there’s a value in doing this. Even if you don’t do a transaction in the end, it’s still good to have all of this in order.”