Finding the Perfect Fit
Tanny Crawford and Paul Martin talk about some of the most successful deals they've seen recently, and how the common denominator was the effort put into finding the best match.
Full transcript
Generated from the episode audio and lightly edited for readability.
Hello, my name is Tanny Crawford. I am the director of business development for Martin Healthcare Advisors. I'd like to welcome all of you to another episode of Paul Martin's Crucial Conversations called Finding the Perfect Fit. And we have with us today Mr. Paul Martin to give his expertise on this topic. Great to be here, Tanny. Paul, finding the perfect fit is kind of difficult, I'm sure. What are some criteria that you use to identify potential companies for mergers and acquisitions? You know, this is a really important topic because anytime we approach taking a company into the market, most important thing is finding that perfect fit.
And that comes through a long and arduous process. But, you know, first and foremost, what we find when finding that perfect fit is there's an alignment of the company cultures and values. So, the seller or the future partner feels from the buyer, the new partner feels that cultural similarity as well as values. You know, there's other there's many other things as well. Sometimes there's complimentary program lines, a program that a seller is looking to build that an acquirer happens to be an expert. Sometimes it's geographical coverage.
Looking to get into a new state and the acquirer has an in on a state. You know, many times it's a reputation of quality care. You know, you need to be really careful as it relates to quality care because there's lots of definitions of quality care and how does quality actually get measured and many times there's market chatter that some of the big companies don't have as good quality in the care that they that they provide. So, you really have to find out for yourself and go through a full process where you can be in front of these acquirers and ask them some of the really tough questions about how do they actually measure quality?
Because if you join a company that has different values as it relates to the care that's provided and the outcomes that are achieved, that's not going to be a good strategic fit. And also strategic goals. You know, as we are lining up companies and we hear similarity in goals, we always know that has the potential of being a great fit. Paul, I was thinking of something along those lines. There's market chatter that happens right out in the out in the rehab space. What is market chatter?
Yeah, you know, when we go to conferences, obviously there's lots of conversations among business owners and what tends to happen is one business owner may be in a market that one of the big companies has multiple clinics around them and so they are their direct competition. Hence, they're looking for reasons why they are not as good. So they may bring up some of the patients that may have come from these clinics and not had good experiences. But what we find is you know many of these companies some have 500 or more clinics and in certain markets yes they may not have as great as care as they do in other markets but by and large most of these big companies the people that are behind them have every intention of providing the best care that they possibly can.
Strategy is very important and I'm sure it's difficult finding the perfect fit for a company for an acquirer. How do you evaluate whether a company is a good strategic fit for a merger or acquisition? Yeah. And I and I think using the word perfect is sometimes we got to be careful with using the word perfect. So a good strategic fit I think is what we're looking for. You know, many times there are operational efficiencies and potential synergies by which an acquirer happens to have an expertise in a certain area that the seller or the new partner does not.
You know, there's also positioning as we look at a map. We have a market mapping analysis that we use and what it does is it marks our client and then it puts all the acquirers around them so that we can see what companies will have an improved market position by aligning with our seller and vice versa. In many cases in this current market, it's an opportunity for growth. And as we all know with staff shortages, it's an opportunity to have a recruiting department in many cases working for you as well as improved knowledge on starting new clinics.
And again, as I as I mentioned, just a geographical fit sometimes can be a great reason for companies to come together. As companies come to you to Martin Healthcare for advisory services, are there any red flags that might indicate whether a company's a good fit or not? Great question. And we get this a lot after having conversations with companies. They may ask, will we be a good fit for acquirers that are out there? You know, one of the I think advantages of doing what we do, which is all we do is physical therapy all day long, working on improving companies and obviously taking them into the market, is that we know these acquirers really well.
And what sometimes is a little unnerving is when the culture of the seller, we're looking out wondering where they're going to have that match. So sometimes it's boy this company will match with many companies out there based on their management philosophies based on their clinical philosophies. Sometimes there's only a few and so we have to be very targeted in our approach to make sure that we find that good fit or good strategic fit. You know, on the seller side, we want to be careful with going to companies that have, you know, the history of dropping the price in due diligence and many times without real good, solid, valid reasons.
You know, after every transaction, we go back to the companies that did not get the transaction and we are very real with them why they did not. And so we may, you know, in some cases we're telling them on the deal that we did, you know, two to three, you know, months ago. There was a drop in price with really no reason through due diligence. So they know then we're going to be careful. And then finally I think legal counsel is a big thing in moving companies through a process and sometimes these companies use outside legal counsel that also have many other priorities other than the acquirer and so the legal counsel gets caught up in all kinds of other things and our deal gets pushed to the bottom.
So, we're looking for that in this in the acquirers in terms of how did that legal process go in the last deal that we did. And sometimes, you know, there's just a reputation that companies just aren't getting deals done. We'll have a company come to us and say, "We were called by company X." and we will know that in the last four years we've brought companies to this acquirer and they have not stepped up and given the best offer in any of those. So we immediately bring a little caution to that and say okay we can give them another chance but just know that there's a history here that this particular acquire has really not stepped up and been the best fit for many of our other companies.
Paul, I see and I hear that the respect that Martin Healthcare has gained, the trust that they have gained from these acquirers is because like you mentioned earlier, you go back to them after a maybe a deal has fallen through to try to figure out the inner workings and really build that trust. That's great. So, thank you for the information today. Thank you for being with us. I appreciate it. It's been great being here and I attribute that what you just said to our M&A team led by Tom Carden who drives us to always do the right thing.
And as you just said, the right thing is to go back to the acquirers who didn't get a transaction and tell them why. So, thank you again, Paul. I appreciate it. And thank all of you for watching today. If you would like more information or a conversation with us, click the link below and we will talk.
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