A Time For Decisiveness
Join Carter Schelling as he reads between the lines in Rebecca Springer's interview and suggests that right now is the time to make the decisions that will help you get the best possible deal for your company.
Full transcript
Generated from the episode audio and lightly edited for readability.
Welcome to studio 3655. [clears throat] I'm Carter Schelling, director of business development for Martin Healthcare Advisors. For the last several years, I've been helping Paul create his terrific series of video interviews and presentations, many of which were shot right here in this studio. I also run an organization called 3655 Incorporated. And for the last 42 years, I've been helping my business owner clients build extraordinary companies in ordinary industries. Today, I'd like to offer you my perspective on the opportunities for action available from the Rebecca Springer interview.
Now, normally my job is to be good cop and to show you about all the good things you can do. Today, I want to want to walk in the other side of the street and say,"Well, what would bad cop get from this interview? What if the glass isn't half full? What if it's half empty and leaking?" Let's take a look at that perspective because in many situations, there's good news and there's bad news. In this situation, I think there's a context that's slightly different. Let's take a look.
So, who is this woman? You know how we got her? We sat around saying, "Who knows what's going on with all of private equity? Who has the vantage point in seeing the entire industry and can make sense of it?" Pitchbook. That's what they get paid to do. Really? Okay. Well, we're a member. We pay them money. Let's see if we can get somebody from there. And they we asked them like who is on top of all your research for healthc care investing from private equity? Oh, Rebecca Springer.
Oh, can we meet her? And we were fortunate enough that Rebecca decided to spend some time with us. And man, is she smart and is she well informed. It was breathtaking. Let me tell you, this woman knows what's going on with private equity today. How should we interpret her tone? Well, like everybody, she couched her words in kind of and sort of and beginning to and a little bit. But there's some dark messages available here, and we have to listen to them if we're going to stay ahead of our competitors and the curve in the consolidation that's occurring in our industry.
Because unfortunately, I say bad cop today. What we have here is a case of not good news, bad news, but bad news, bad news, bad news, bad news, good news. Let's take a look at what I mean. Number one, she said it. Multiples are down. No kidding. We've heard a couple different people say that. She said it. She's on top of the whole industry. Multiples are down and they're not coming back for a while. Number two is hadn't heard this before. It's tougher for private equity to get the money they get before they give it to you.
The syndicated bond market is closed. So now we're down to deb to debt money, not bond money. More expensive, more subject to going up and down with, you know, interest rates. Not good. Number three, we are in a cycle that naturally turns down. She said, "You know, the dermatologists in their cycle, they're further along in their cycle. Deals are down there. We're the same cycle. Sooner or later, it goes down." And we can maybe can start to see maybe in the distance how that it's going to happen to us.
Number four, this is this freaked me out. Okay, private equity has never been through a period of high interest rates. That's how recent their entrance to the scene is. They've never had to deal with expensive money. Oh, what does that mean? Don't know what that means. But I tell you one thing, it definitely means more risk. More uncertainty equals more risk for you if you're counting on selling your company for a great number in the foreseeable future. All right. [sighs] What's the good news? The good news is now is still a good time to get a good deal.
She offered that now is a good time. She didn't say now and forever. She said now. How can you turn that into an opportunity for action? Well, you can look in the mirror and ask yourself, what do you really need? Candyland is over. Things have landed on the ground now. Now, what do you really need to be able to finish well and move to the next chapter of your life in terms of money, structure, and the right acquirer? You got to get serious about that. Now, second of all, you need as many different options, as many different acquirers who qualify according to your criteria as possible.
Because I'm a big proponent of the biggest thing to drive multiples and valuations up is lots of qualified buyers. You've got to make sure that your intermediary, whoever it is, can bring those to the table at a time when, you know, some people's money supplies are sputtering. Some people are slowing down. Some people are holding up on things right now. You know, Rebecca said there's 26 billion dollars of dry powder out there looking to invest in the healthcare industry. And then right after that says, of course, there is the cost of capital to be reckoned with.
Well, yeah. The money is dry and it's going to stay dry if it thinks that the cost of capital makes it impossible to make their desired returns. Hasn't happened yet, but it's coming closer. I say, speaking for me. Next, you got to outpre your competition so you have a great story and a great ability to close the deal in a straightforward fashion without hang-ups and delays. Finally, you got to beat your competitors to the punch. Look, if you're going to go, my strong advice to you, I'm not speaking for my firm, my strong advice to you is go early.
Get a jump on everybody else who's going, "Is this the time for me to sell? If you're ready, you got to go now because we don't know." And she was good at saying, "We don't know what comes next." But we do know that we have more experience, better relationships with more people in this industry and that if anybody can get you the best possible deal in the coming uncertain times, it's us. Let's start a conversation about how we can help you finish well. Put your name and email and down below. We'd love to start that conversation. Thanks for your time today. I'll see you at the next show.
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