Acquirers Expect You To Clearly Prioritize Your Needs
This week, Carter Schelling's OFA on the Navid Hannanvash interview explores an interesting implication of the arrival of new acquirers. The expanded range of options offered by new acquirers will be valuable to you only if you and your team are strongly aligned behind what's most important to you.
Full transcript
Generated from the episode audio and lightly edited for readability.
Welcome to studio 3655. I'm Carter Schelling, director of business development for Martin Healthcare Advisors. I also have my own consulting firm, 3655 Incorporated, where for the last 43 years, I've been helping business owners build extraordinary companies in ordinary industries. For the last several years, I've helped Paul create his wonderful video series of seminars and interviews, some of which were shot right here in this studio. Today what I'm doing is the opportunities for action from Paul's interview with Navidid Hanenvage CEO of Rise Physical Therapy 20 Clinics California to show you what he represents as a challenge to the way you've been thinking about doing your deal.
Let's get going. Number one, what's the context here? Who is this guy? Well, most importantly, he's a representative of a new class of acquirers. We call them the upandcomers. The people who just got into the game and he's a very entrepreneurial version of a acquirer owner. Now entrepreneur, what does that word mean? Well, it's a French word. It comes from two French words. Entrepreneur to take entre the opening. So entrepreneurs look for openings and then take them to move themselves forward past their legacy competitors. And that's what Navided's all about.
What they're about there is his tone tells you, "We can do this. Okay, we can do this. We don't know how we're going to do it exactly. We have some idea, but we can do this. And we're going to do it by doing the new stuff." They all feel the key to their success is going to be doing something that the legacy companies haven't done that's going to allow them to move forward while the others may be not moving forward as quickly. Let's take a look at what that means for you.
Nav's contribution to your success. Number one, because he represents what you might call a class of outliers, companies that are outside the pattern we've seen for the last couple of years, he and they broaden your options. They broaden the spectrum of things you can get as a seller. Good news, bad news. It means you have to be more specific and more clear about what you really want because you won't be able to take advantage of them if you aren't super clear. Number two, when you decide that you got to write it down so you can give it to whoever else has influence on your decision, your spouse, your partners, your managers, so they can read it, sleep on it, and come back to you with their thoughts because you need to have everybody aligned.
Everybody on the same page about what we want before the negotiations begin. Then you have to investigate every relevant acquirer. You have to work with an intermediary who knows every relevant acquirer because an outlier in this case may be the best possible acquirer for you. You have to feel confident that they know every. We invest an incredible amount of time and money in making sure we know every because every seller is unique and their needs change over time and from one seller to another. Now, after you c after you've contacted all the relevant candidates, you need to score them in terms of their match with you based on a matrix of criteria.
We can give you one, but you need to have an analytical approach that allows you to truly weigh all the factors and come up with the logical best choice for you. You then need to take your finalists and validate your first impressions with research. Talk to people who've already sold to them. Talk to people who've worked with them. Look more deeply at how their organization really functions daytoday. You're going to spend a long time with them. Put the time in now to make sure that your first impressions were in fact correct.
Finally, after you make your pick, you got to work really hard to make sure you're their first choice because they have options, too. We're in the business of making you their first choice. We can help you with that. So, that's the overview of the contribution. Now, some of you are more analytical than others. For the ones who are really analytical, I thought I would open this up and add a couple of layers of available analysis that can permit you to reduce the possibility of making a mistake, to reduce the possibility of missing something.
But hang on because we're going to get pretty darn granular here. Let's start with that phrase, decide on what you really want. There's a lot of stuff to want and you need to be able to break that down into subp parts so that you have a clear grip on what you really mean by what you really want. And the first way to do that is to recognize that there are different I for me about seven different dimensions of your yield from the deal. Let's take a look at what the list I've created.
The first dimension obviously is the valuation. How much money you get. That was easy. But that's also something that needs another layer of analysis. People say, "Well, I'll tell you what I want. I want at least this. I've always thought I wanted that." When you ask someone, "How much do you really want?" It's usually this range, which is not good to go into a negotiation with. You need to have buckets. By buckets, I mean three subcategories of what you want in a valuation. We use something called MPV.
Minimum primary visionary. You need to be able to say what's the minimum amount of money you want. I.e. If you don't get it, you failed. Okay. Number two, you need to say what's the primary goal? I.e. If you get it, you succeeded. It's pretty simple so far. Finally, visionary. What if it's your lucky day and your dreams come true? What's an imaginable amount that you could dream about and have in your mind when they said, "How much do you really need?" Your MPV. We're going to use that over and over here.
So, the second dimension of the yield is the structure. When you get your money, how you get your money in a big lump with a nice ribbon tied around it or down the road after you work for three or four years. Many people will say that structure is as important as or more important than validation because it dictates really how the money flows and what triggers each level of success. Number three, the cultural match. Everybody says culture. Yeah. Yeah. Culture is important, but you're not going to take zero dollars in return for a great culture.
And people talk about culture like when they say great culture, it always means the same from company to company. Two different companies can have two great cultures which actually are not in alignment but they each like them. So when you say cultural match, you have to tell me if the other guys have a cultural match you like. What does that mean? How would you know? Give me an example. Or you don't really have a clear idea of what you want in a cultural match. Next, you're matched with their leaders.
These are leaderrun companies. You got to click with the leader or it's not going to be a good ride over the next several years. You have to know what the acquirer's goals are, what their strategy is, and feel like it makes sense to you, and you're willing to invest yourself and your people in the success that they're pursuing and the way they're pursuing it. What job are you going to do afterwards? What are the activities you're going to do daytoday based on their needs? How about your managers?
What are their activities going to be like? Who are they going to be working for? Very important. Can really sour a deal when you turn out, oh man, they got me doing something really dumb here. And on top of that, nobody listens to me. You got to decide how much influence you want to have post deal over where the ship's going and how they're doing it. Got to decide MPV. Okay. Now, another level of analysis worth pursuing, although you may be getting tired of this. This is how we protect ourselves against, "Oh, no, I didn't think of that." Okay, each dimension is important, but they're not equally important.
You need to be able to prioritize what you're looking for. And we do that with a waiting system. Some dimensions are more important than others. You need to weight them to reflect their importance. We take a hundred basis points over the dimensions and we sprinkle them around waiting some more than others. Truth be told, the first three, the big three usually suck up about 60 of those 100 points. All right, maybe not all 2020, but the big the big majority of the points goes to those three understandably because those drive success more often than anything else.
But with 40 points remaining, you can take the remaining 40 and prioritize the last four dimensions. Which is more important? Which is if you want to fight for something, which one are you going to fight for? The waiting tells you that and tells your adviser that if number five is worth 35 of the 40 points, that's important because we're going to fight for that. The others, well, you know, we can give them up at the negotiating table. You got to know what you'll fight for and what you'll let go.
So overview, Nave's contribution, know what you really want, get your team behind it, investigate all the possible acquirers, make sure that they score on your sheet in a way that allows you to easily pick who makes the most sense for you. Double check your first impressions, and then make sure you're their first choice. We can help you do that. Thanks for your time today. Look forward to seeing you on a future show.
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