Summit live: There is opportunity in the unknown
HME providers aren't exactly the hottest properties in town, but there is opportunity out there, say industry M&A experts. We are wrapping up the first day of the HME Business Summit with a panel consisting of Dexter Braff, The Braff Group, Jonathan Sadock, Paragon Ventures, Rick Glass, Steven Richards & Associates and Don Davis, Duckridge Advisors.
What am I worth?
Sadock: Valuations the way we see them today are dramtically different than the way the y used to be. There are more buyers than there have been. They pushed the pause button a few years ago because they couldn't figure out valuations. Now, we are starting to see buyers that want to buy but they are having a hard time finding sellers. They think that sellers want more than what their business is worth. They are willing to pay a fair price but not an outrageous price.
Davis: Buyers can now do the math. It's simple math. A buyer can price a business. From a seller's standpoint, that sucks. The secret for the sellers is that you understand that. If you don't, you should. You need to talk about the intangibles and those things that make your business different.
Should I buy?
Sadock: What do you want out of your business over the next 3, 5 or 10 years? Decide where you want to go. If you want to know what the future is like, you need to decide. Then focus on doing that.
Davis: The only circumstance in which you would want to be a buyer is if you are relatively debt-free or have access to capital. And, you should have some experience in doing consolidation or acquisition business. It makes a lot of sense to be a buyer in the right (opportunity) but you've got to go through the checklist.
Braff: Tough call. Some of the best buyers are looking at traditional HME respiratory businesses. They are above $7 to $8 million in revenue. They are regional providers. If you believe in your business from an operating standpoint, I would be an aggressive buyer. Lincare, Apria and Rotech blew it during the transition period. It's the unknown where the best opportunities exist.
Where's the money?
Glass: I have seen smaller acquisitions with SBA financing. This is a time where you have to be very opportunistic. I also think in this environment I am seeing more willingness on the part of these smaller sellers, if they like the culture, if they will take care of the employees, we are seeing some seller financing involved in some of these smaller transactions.