Acquisition

Article Dean Dorton

Dean Dorton has expanded its healthcare services in Kentucky by acquiring Metro Medical Solutions, LLC, a long-standing physician billing and credentialing company located in Louisville, KY. The merger was effective April 1, 2017. The new physician billing and credentialing services will be combined with Dean Dorton’s existing healthcare consulting practice and, branded as Dean Dorton Healthcare Solutions.

“The addition of Metro Medical Solutions and their team helps us to better serve our growing healthcare practice. We are enthusiastic about the high level of service and expertise Metro Medical Solutions has provided its notable client base and the opportunity to expand services to our current clients, which includes many physician practices,” said David Bundy, President and CEO of Dean Dorton. “Metro Medical Solutions is highly regarded in their ability to maximize reimbursement for physician practices in a short amount of time at a low cost, creating tailored solutions for each individual client.”

“With the incorporation of Metro Medical Solutions, we can now offer our physician practice clients a full suite of outsourced services, from accounting and financial outsourcing to billing and credentialing. We are now able to handle all back-office functions, which can allow physicians to focus solely on the demands of their clinical practice.” added Adam Shewmaker, Director of Healthcare Consulting Services at Dean Dorton.

“Our clients’ needs always come first. With the combination of developing client needs and continuous growth, it is critical for us to find a way to continue providing high-quality service efficiently and effectively while providing clients with additional value through a broader range of specialty capabilities, advice, and solutions. In addition, we want to offer more opportunities for our employees and referral partners who are the backbone of our business,” noted January Taylor, current President of Metro Medical Soltuions. “We are thrilled to be a part of Dean Dorton and to be able to provide our current clients with a full scope of accounting, advisory, and medical billing and credentialing services.”

“Joining teams with Metro Medical Solutions allows us to continue our firm’s long history of providing innovative financial and business strategies to help our clients succeed now and in the future,” Bundy remarked.

Dean Dorton Healthcare Solutions includes a team of more than 20 experts who specialize specifically in healthcare accounting and financial outsourcing, medical billing and credentialing, revenue cycle management, compliance and risk management, technology, human resources, and advisory services.

Article Dean Dorton

In our last newsletter, Determining and Increasing Business Value, we discussed the three primary approaches to valuing a business. We described how value hinges on projected cash flows and risks associated with achieving them. And, we explained that a business owner can increase value by increasing cash flows and lowering risks. In this article we focus on the various levels of value associated with a business (or business interest), and we discuss strategies for maximizing value.

Though we often think that value means one specific amount, various levels of value are associated with business interests. These levels of value reflect varying degrees of control, marketability, and synergies with other enterprises. The levels of value, from highest to lowest, are illustrated in the following example:

$12 per share Synergistic (or Strategic) Value (reflects a 20% strategic premium)
$10 per share Control Value (reflects control and liquidity)
$7 per share Noncontrol, Marketable Value (reflects a 30% discount for lack of control)
$5 per share Noncontrol, Nonmarketable Value (reflects combined discounts for both lack of control and liquidity of 50%)

In arms-length business acquisitions lacking strategic or synergistic features, buyers and sellers tend to negotiate a purchase price that approximates the control value of the business. A buyer seeks to maximize value by identifying a target with strategic or synergistic potential. If the buyer is able to purchase the business at control value, but operate it at a level consistent with strategic value, the buyer has effectively purchased the business at a “bargain.” By capitalizing on synergies or other strategic advantages, the buyer’s return on investment will be enhanced. A buyer tries to negotiate a purchase price without paying for synergies or other strategic value that the buyer brings to the deal, while recognizing that if multiple potential buyers who recognize synergistic or strategic potential are involved, the purchase price may get “bid-up” to an amount approaching strategic value.

One of the ways to realize strategic value is by buying a competing company. By eliminating a competitor, the buyer is able to capture a greater share of the market, providing opportunities for increasing revenues and reducing costs. Similarly, a buyer can purchase a supplier or distributor to create vertical integration. This will enable the buyer to save the “mark-up” in supply or distribution costs, resulting in greater profits. Other strategic acquisition value can result from purchasing one or more companies, enabling the buyer to generate economies of scale, leverage existing expertise and know-how, provide for “one-stop” shopping, or create a level of “critical mass” that provides an advantage in the marketplace.

We have approached the idea of maximizing value from a buyer’s perspective, but a seller can also maximize price by marketing and selling to a strategic buyer that can create synergies between its existing business and the targeted business. The seller, though, often needs multiple potential buyers in order to realize a price that reflects strategic value.

If you have any questions or would like to discuss your business, please contact one of the members of our forensic accounting and business valuation group.

David Parks, dparks@deandorton.com

John Herring, jherring@deandorton.com

David Angelucci, dangelucci@deandorton.com

Missy DeArk, mdeark@deandorton.com

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Article Dean Dorton

Merger and acquisition (M&A) transaction volume in the healthcare industry is off to a fast start in 2015, continuing the robust trend from 2014.  Many analysts and executives believe M&A activity will continue its strong momentum and may accelerate at an even faster pace for the remainder of 2015.

Participants in the marketplace, both buyers and sellers, are assessing whether future transactions meet their organization’s goals and operational strategies.  Furthermore, management teams are assessing the value of the subject entity to ensure the transaction price reflects the current market and maximizes their long-term return on capital.  Understanding the marketplace of the subject entity can be a daunting task and determining whether the assessed value will enable the organization to meet its objectives can be challenging.  To further complicate the analysis, Stark Law requirements and other regulatory concerns must be addressed.

The approaches to valuation are often implicitly known and performed, but often not formally outlined. The three primary approaches to valuing a healthcare entity (or any closely-held business) are the asset, market, and income approaches.  The asset approach looks to the subject entity’s tangible equity on the balance sheet, but often ignores the intangible assets (e.g. customer relationships, assembled workforce, and goodwill).  The market approach uses known transactions in the marketplace for entities that are comparable to the subject entity to arrive at valuation multiples (often reflected as multiples of revenue or earnings) which are applied to the subject entity’s financial metrics.  The income approach derives value by converting the subject entity’s forecasted future cash flows to present value using a discount rate adjusted for the risks of the forecast, industry, and inherent characteristics of the subject entity.

Dean Dorton’s valuation expertise and experience, combined with its healthcare industry knowledge, has contributed to the success of many M&A transactions.  From guidance in strategy to valuation, Dean Dorton can assist with the challenges involved with M&A transactions.

For more information, contact Adam Shewmaker at 502.566.1054 or ashewmaker@deandorton.com or David Angelucci at 859.425.7695 or dangelucci@deandorton.com.

View Adam Shewmaker’s Bio