Southern Home: What's the attraction?

Saturday, June 30, 2007

The phone at Southern Home Medical Equipment, a new HME roll-up, has been ringing off the hook. More than 50 providers seeking an exit strategy have "express(ed) a strong interest in joining the Southern Home team," the company stated in a recent release. So why do so many independents no longer want to go it alone? Here's what Greg Tucker, Southern Home's president and CEO, had to say when HME News caught up with him.
HME News: What is it about Southern Home that's generating so much interest?
Greg Tucker: A lot of people in the DME industry are happy they're in the industry, but they're also looking for an exit strategy. Because the number of acquisitions over the years has declined, there aren't as many choices for them. Do they turn their business over to a family member? To a business partner? To an investor? To a private company that may or may not have experience in DME? What we offer is a very streamlined exit strategy that involves more than cash--it involves stocks. That gives people more enthusiasm about going to work every day.
HME: Why are providers looking for an exit strategy?
Tucker: It may be their age; it may be anxiety about certain things like competitive bidding or accreditation. For many, it's simply, 'I've been doing this for a while--how do I gradually get myself out of the business or how do I walk away from this without walking away and having nothing to show for it?'
HME: The providers who are interested in joining Southern Home--what are their situations?
Tucker: Every situation is different. They could be doing $1.5 million in revenues and they're extremely profitable because they have very little debt, but they're looking for an exit strategy because of their length of service. They could be in a position of strength, with multiple locations, and they're looking for more than just cash.
HME: How will Southern Home determine what providers to roll up?
Tucker: As we move into our investor relations phase and start raising operational capital, we'll categorize and prioritize the providers we want to pursue. We'll ask: Are their operators honest and credible; how's their cash flow; are they accredited? There are a number of variables, but first and foremost, we'll look at who the operators are and how they would fit in, from a personality standpoint.
HME: Once Southern Home grows, how do you plan to keep possible differences between affiliates at a minimum?
Tucker: Initially, things like credibility and personality. But when it comes right down to it, we're heavy on the legal side of things. It really boils down to having a sound legal document that is as close to ironclad as possible and that works for both parties.