Part 3: 6 Key Predictions for 2025 To Shape Your Growth Strategy
This week, Paul concludes his series of predictions regarding the trends that will have the greatest impact on M&A in 2025. Discover how you can take advantage of these insights to position yourself for the greatest possible deal.
Full transcript
Generated from the episode audio and lightly edited for readability.
Hello and welcome to another episode of the Martin Rehab M&A Advisory. I'm Paul Martin, founder and president of Martin Healthcare Advisors. And today I'm really excited because today we're going to continue in our series of my predictions for the rehab, merger, and acquisition market for 2025. And in today's episode, we're going to delve in to our fifth prediction and our six predictions. So let's jump right in and start with prediction number five. Prediction number five is that high-erformance cultures will lead the pack in mergers and acquisitions in 20125.
Today we have an extremely competitive landscape and organizations that have successfully garnered and fostered high productivity levels while cultivating in addition an exceptional workplace culture. Will outpace their competitors in the merger and acquisition industry. They're going to get the best deals in this industry. But let's be really clear, culture just is not about catchy slogans or mission statements. It's about the specific behaviors of your staff that define your daily operations. Who you are, what you are, what you're all about. And so, can you clearly articulate your culture and what makes your company superior?
Because this is crucial. Acquirers are looking for sustainable practices that have high levels of employee satisfaction. And that all delves into your culture and it's absolutely critical to your long-term success whether you look to a part partner with a larger company or not. You know, a company that we look to as it relates to culture and according to this company which is called culture-wise, companies that systematically create and drive and sustain high-erforming culture are well positioned to scale and lead in their industries. Well, large physical therapy acquirers are looking for industry leaders.
So it is critical and crucial to drive that culture. And what it involves based again on what culture- wise is defining the specific behaviors that drive success and then establishing rituals to teach those behaviors and ingraining them into the team. And we all know rituals are not something that are built in one session or are built by some motto that we put up on our walls. It's about working week over week over week at these behaviors. And literally, it's about creating a culture that is not only articulated but lived every day by all team members.
You know, private equity firms and again, the private equity firms are the financial engines behind these strategic acquirers and they are actually very keen on valuebased cultures that drive the ability to change and maintain a patient first mentality. It's very clear when companies do not have that patient first mentality. And if I was to help drive a culture in a physical therapy business, that would be the first thing that I would want our behaviors to represent. Patient first mentality. And this kind of focus really decreases risk and increases the willingness for these companies to invest.
Essentially, your culture becomes the center of your company's story and that is what you will tell interested acquirers. That story and a very strong well-defined culture signals to all investors that your organization has a couple really important items. Number one, resilience. Number two, adaptability. And number three, makes you poised for growth. Even research from McKenzie highlights that understanding and proactively managing culture and this is coming right from the study is critical to successful integration during mergers and acquisitions. A welligned culture can drive improved returns and ensure a smoother transition post acquisition.
So therefore, companies with high performance cultures are not only going to get the best deals, but they're also leading the pack as it relates to their integration process with their new partner. All right, my final prediction. Prediction number six, seasoned aligned leadership teams will outperform companies that do not have this in place. Let's talk about the importance of a leadership team. We have been working with companies to build leadership teams for years and years and years. And as I look back, the best transactions that we have ever done have been with teams that have truly made a commitment to growing and developing their leadership team.
Typically it comes down to a group that involves their highlevel leaders of the organization. So let let's take an example of an eight clinic company. Typically an eight clinic company will have eight clinical directors. They may also have somebody that is a coverer or leads those eight clinical directors. There's probably a director of marketing. There's the owner of the business. There's the director of billing and collections. And so that would be a group of leaders that would embody about 10 to 12 people, maybe a couple more, a couple less.
Bringing that team together at least on a monthly basis, talking about the vision that you have for your company and any changes that you are going to make within your company, getting feedback from them on things that are happening at the local level within those clinics and then being as a group being able to respond to those things is absolutely critical. And while I'm saying that my prediction is that those teams that have those leadership teams are going to outperform others, it's because of the interest that acquirers have in companies that have built a true leadership team.
These are also companies as in my prediction number five that typically have better cultures. So in our years of experience to define and to actually make and embody a leadership team in your company, it can start as little as if you're a two or three clinic company, it can be three or four people, but you want to have those people that you can lean on when things get rough in your market that you can lean on and that you know they will work along with you to tackle any challenge.
Now, something that we've done over the years that actually allows many of those folks to participate in a transaction is something we call a growth share agreement. And this is an agreement that basically allows your folks on your team starting at a critical start starting point as your business grows they earn value in this growth share agreement and then over time and I'm just going to roll this right to a transaction event. Depending upon how much they have earned and they have grown in their gross share agreement, they can take that and roll that into a partnership with a larger company along with your equity that you may roll.
This is so attractive to an acquirer because it enables you now to come with a team of those who are going to be built for the future aligned with the acquirer as well as with you to grow the company. And as I had said in prediction number five, take that second bite of the apple. It is, you know, study after study shows that teams with strong committed leaders outperform in transactions and post-transactions those that come without a fully embodied leadership team. So again, my prediction is those who have built and have been made investments in these leadership teams are going to outperform those that have not.
And if you do not have a leadership team and if you have not put in place a growth share agreement in your practice and you're interested in either one of those things or anything else that we've talked about in these episodes, please click below and let's talk. Thanks and have a great day and a great weekend.
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