How transitioning a PT practice actually works, step by step

The short answer

What are the steps from a first conversation to a closed transaction for a physical therapy business? Paul Martin, Founder and President of Martin Healthcare Advisors, walks through each stage and the realistic 6 to 8 month timeline.

The process:

• Outside-In Assessment: three hours covering your goals, a real valuation, acquirer positioning, and your best options
• Choose a path: straight to market, prep first, or grow
• Step 1: Strategy, the confidential information memorandum (CIM), and a hand-picked acquirer list
• Step 2: NDAs signed, preliminary indications of interest, everyone on the same timeline (synchronized competition)
• Step 3: Management meetings with coaching, then letters of intent (LOIs)
• Step 4: Due diligence, purchase agreement, and closing, with your data room already built
• Prep path: drive EBITDA first through charge capture, scheduling, marketing, productivity, and leadership
• Grow path: de novos, small acquisitions, and building value

Full transcript

The path from our first conversation to a closed transaction has defined stages, and I will walk you through each one. It all starts with the Outside-In Assessment. This is a three-hour session with our top people. We dig into your business goals as well as your personal goals. We give you a real valuation, we show you where the acquirers are positioned around you, and we lay out your best options. Coming out of that session, you have a clear picture and you have a decision to make.

It's from there that you have three paths: go straight to the market, do prep consulting first and then go to the market, or just simply grow.

Let's take straight to the market first. From the day we start to the day the wire hits, it's typically six months, four steps. Step one is preparation, about six weeks or so. We build the strategy. We build the confidential information memorandum. That's the book that tells your complete story. And we hand-pick from the acquirer list. Not everybody, the ones that fit you strategically and culturally. Those are the ones that we're going to pick for your process.

Step two is marketing, typically about four weeks. That's when we get confidentiality agreements signed and put that book in the acquirers' hands. They come back with preliminary indications of interest. Everybody gets the same information on the same timeline, and that's why we call it a synchronized competition.

Step three is acquirer diligence and final offers, about six weeks. We set up management meetings so that you meet acquirers face to face and they meet you as well, and we coach you through every one of those meetings. Then they come back with formal letters of intent and you pick your partner.

Step four is documentation and closing, about 10 weeks typically: formal due diligence, purchase agreements, and the legal process. We're not attorneys, but we're on the legal calls and we're working closely with your attorney. We've already built your data room, so we handle the acquirers' questions as they come up.

Add it up, that's right around six months. But trust me on this, there are always delays. A holiday, an attorney pressing on a point in the document. So realistically, plan on six to eight months.

Now the prep route. This is where we work with you side by side to drive your EBITDA before you ever go to market. We do things like charge capture, schedule management, marketing, productivity, building a solid leadership group, everything we can do to get you fully prepared so you get the greatest value you can. Then we take you to market and run the exact same four steps I just described. This is a route that routinely doubles or triples what a company is worth.

And the third route is growth. Sometimes you come out of the assessment and you decide you're just not ready to sell. You just want to take the business to the next level. So we come alongside you and do that. It can include everything I described on the prep side, plus helping you open new de novos and helping you with small acquisitions.

The main point is this. Whichever path you take, it's a process. Every step is planned and every acquirer is on the same clock. That's how you get the best price, the right structure, and the fewest surprises.

Transcript lightly edited for readability.