How We Overcome Challenges…
Our team diligently works to advance each deal to a successful close. On occasion, extra special attention, creativity, patience, advocacy, etc. is required. We’re ready for these challenges…Consider a few of our success stories.
Due Diligence Can Be Challenging
In due diligence, emotions run high and nerves get frayed.
A buyer requests numerous bits and bytes of information and documents. A seller busily gathers the info for the buyer and hurries to complete their own due diligence.
The good news…at the center of this storm of activity, MT Consulting is hard at work. We coordinate the response to due diligence requests and organize data exchanges. We answer questions, anticipate buyer concerns and work with our clients, the seller, to mitigate deal-breaking issues.
During a routine due diligence and only two weeks before a scheduled closing date, we encountered a snag – with the potential of breaking the deal. The buyer learned that Blue Cross of New Jersey was cutting our client’s reimbursement rate by 30%. The buyer’s analysis indicated the rate cut translated into a significant decrease (more than $500,000) in our client’s annual EBITDA. In the heat of the battle, the buyer felt (wrongly) that our client had withheld this rate cut news from them.
MT Consulting acted swiftly. First, we defended our client against the erroneous accusation of misleading the buyer. We convinced the buyer that they had overreacted. Next, we stepped back and independently analyzed the rate cut. Our analysis revealed that the buyer’s estimate of the rate cut impact was far too high. Then, we looked even deeper and prepared a report that quantified (for the buyer) several new revenue initiatives which would result in a net increase in our client’s revenue and EBITDA.
The buyer agreed with our analysis and closed the deal as scheduled. Our satisfied client truly appreciated our strong advocacy and acknowledged that the deal would not have been done without MT Consulting.
Visionary Business Needs Buyer with Vision
One of the outstanding healthcare practices represented by MT Consulting had just completed its third year of business when our team was engaged by the company’s founders. This business was based on a new concept.
The founders were steadfast in their vision and confident that their business could become a national company. However, they acknowledged that the average banker or investor would not be as forward thinking – an alternate source of growth capital would be necessary.
The good news…MT Consulting shared their vision – and agreed to work as long and hard as necessary to advance the company to the next level.
Potential partners typically prefer a track record of revenue growth and profit. Our client was busy opening new sites and building its back-office infrastructure. Consequently, it had favorable revenue projections but limited profit.
MT Consulting organized the company’s financial reports, did our own extensive due diligence, created and regularly updated a detailed business plan. The plan became the roadmap for our client’s growth into a platform company, on its way to becoming a leading national provider. Within 2 years, the plan provided sufficient evidence that this business concept was an economic success.
At this point, we had worked through all of the issues except one…finding a buyer with vision.
MT Consulting knew this special business would need a special buyer. We undertook a rigorous process of studying and tracking industry transactions. Periodically, we shared this opportunity with a select number of partner candidates but only after the business plan was regularly updated and our client’s business continued to grow and mature.
We listened and learned from candidate feedback. Finally, we felt the time was right for potential partners to meet our clients and see the business firsthand. They had just opened their sixth location and were poised to open 3-4 new sites annually. We found a partner candidate, a new firm, seeking its first deal. We had experience with this firm – a smart, focused and driven group – and believed they could successfully complete the deal.
Pay Me Now and Pay Me Later
When an exceptional company tests the M&A market, it generally takes an exceptional deal to motivate owners to sell. This is especially true when the company is still growing.
The good news… MT Consulting recognizes that each buyer approaches its deals differently. With that in mind, we seek buyers uniquely suited to our client’s situation – identifying candidates until a deal exceeds our client’s expectations.
In this case, the client’s business generated $20M in revenue and $6M in profit. Expansion plans would quickly increase these figures by 25-30% (known as a post-closing “Growth Dividend”). Since equity market conditions were favorable for sellers, our task was to find a buyer who would include significant value for this “growth dividend”.
MT Consulting reviewed buyer profiles and determined none were suitable or prepared to recognize the “growth dividend” and overpay for this exceptional business.
We advised our clients to follow their expansion road map – yet, to be prepared to react when the best buyer stepped forward. That buyer would offer our client two things:
- Big payday at closing
- Opportunity for a second big payday by allowing owners to retain a minority interest
MT Consulting diligently worked to identify an appropriate potential buyer. We researched private equity opportunities and found an aggressive, well-funded new platform – focused on adding a premier provider to serve as its East Coast anchor.
MT Consulting introduced the potential buyer to our client’s exceptional business. It was love at first sight. The buyer met the financial requirements and closed the deal within an extraordinary 55 days!
We delivered an outstanding deal to the company’s founders – who are still pleased with MT Consulting’s commitment, diligence and focused efforts in completing the transaction.
Interested in talking about your business? Contact us.