Your Future Growth Is Dependent Upon the Acquirer You Choose
Paul revisits his interview with the CEO of ActivePro Rehab Partners, covering their growth-focused model, local market focus, why there are no state-to-state synergies, and how to vet acquirers.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good afternoon and welcome to another episode of the Martin Rehab M&A advisory. Today we are going to take a look back one week at an interview that we did with Andrew Lotsis and discuss some opportunities for action that you can put into place. Now as you recall and feel free to look back but Andrew is the CEO of Active Pro Rehab Partners. You know, as we have seen in this series of interviewing some of the non-leacy or the newer acquirers in the market that each one of these are very unique in their own special way.
Now, Drew dis described ActivePro as a growth accelerator and that in 18 months after an acquisition, they're averaging a 40% increase in revenues for their acquired businesses. This is remarkable and speaks to someone really rolling up their sleeves and jumping in and guiding these acquired companies. I will tell you this is meat and potatoes. There's no hidden secret here. Drew is a phenomenal operator. And what he's doing is he's combining referral performance. So driving referral performance, new patients, and he's marrying that, marrying that, matching that up with operations performance.
When you do that, you can drive phenomenal results both operationally, financially to the top line as well as to the bottom line. You know, active pro has developed this methodology no different than you could also utilize this methodology. And I think the difference between whether you want to do it on your own or step out and have a partner help you is really where that's the decision process for you. You know, Drew also described the rehab business as a very locally operated business and we have seen many of the successful consolidators at different levels.
Some of the legacy companies, certainly many of the newer companies and Active Pro certainly fits right into this that they maintain that locally operated focus. But let me just bring you to some of the realities which is what will drive costs down in your practice? Well, efficiencies in the centralized functions of your practice, billing, collections, marketing, clinical training, recruiting, staff compensation structures, these are all areas that will tend to potentially take away that local market focus. So again, what Drew is saying they are committed to is continuing to maintain that local market focus.
Easily said, very difficult to execute on. You know, I asked true about how one of their partners would describe their culture and he very quickly without hesitation said, "Integrity." I would ask each one of you that is listening here today that if somebody asked you to describe your culture, how long would it take you to do that? And more importantly, what do you want your culture to be? And let's work on that. You know, to understand what each acquirer is seeking, what they're looking for. We find that is one of the keys for a company that is going into the market to get the best match.
What the acquirers are seeking, you can utilize that to get your best match. And while some acquirers have a pretty broad scope of that, Active Pro was very specific. Drew described their sweet spot is companies in a range of two to eight clinics that the owner wants to grow and be rewarded for that growth. I think that's similar to Aaron Kry's interview if you recall where both Aaron and Drew have maintained that for these types of companies two to eight I think Aaron said one to five clinic companies that they're both going to roll up their sleeves and jump in and help these companies attain their goals.
Drew said something that is just so key and he said that you know look selling your business looking for a bigger partner this is one of the biggest decisions of your life and he said a lot of companies out there will tell you they're going to acquire your company and then leave you alone and Drew brought up that he thinks that's a real negative because in many situations ations. You are looking for a larger partner in order to achieve a growth strategy, a goal that you have had for you and your business.
If they just leave you alone, how are you going to achieve that? You've been left alone for all these years and you have not been able to get to potentially where you want to get to. So, I guess his point there and my point also would be it's not always a great strategy. For some this may this may work. For some of you out there who just want to continue doing what you're doing but under a larger umbrella that may work. But for many of you who I think want to become better.
Companies that kind of dig in and help you to drive through some of the challenges in this business can be a real asset. You know, we talked to Drew about geography and his I thought his statement was a real good one and something that you should consider as you're looking to achieve growth in your business. We hear a lot of business owners and you know they may be in Pennsylvania. We want to go over into New Jersey or we want to jump to Massachusetts or we want to go down to North Carolina.
There are really no stateto-state synergies. Those were the words he used. There's no stateto-state synergies. So just because you're on the border of New Jersey and Pennsylvania, the issue you have once you go into a new state is many times the way in which the physicians relate to physical therapy providers is unique. Certainly the payers are going to be unique in whatever state you go into new state. It's going to be different. Certainly legislation is different. Some of the medic Medicaid guidelines are different. So just keep in mind that there really are no state-to-state synergies.
And Drew brought this up talking about active pro that they're looking to maintain and grow in a state before they move into another state. And they would probably find an anchor or a platform acquisition that really knew and understood a new state, you know. And finally, Drew offered some really great advice for companies looking to go into the market. And his advice was to request from a potential acquirer to see the results of other acquired businesses. And I thought this was a great point. You know, this is why knowing the acquirers, knowing their history, knowing their past performance with other partners is absolutely integral to you finding the best deal available in the market for you.
Drew described this as a marriage. Think about the amount of information you wanted to know or you may want to know about a potential husband or a potential wife. You want to know that person, you know, intimately. Well, Drew's point was you want to know the company that's acquiring you intimately. Look, Drew brought so many great points to light and I hope his interview and I hope some of the opportunities that we presented today you can put into action. I look forward to talking to you in the very near future. And if you have any questions about the conversation we had with Drew and the discussions we had today, click below and let's talk. Thank you.
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