Zak Eisenberg is the Vice President of Merritt Healthcare Advisors, which provides investment banking services to healthcare services organizations. In his role, he manages the strategic development and execution of ASC, surgical hospital, and physician practice transactions. Zak specializes in sourcing and analyzing transactions and capital and negotiating and structuring investments. Previously, he was a Biofund Venture Analyst at New Orleans Bioinnovation Center, a biotech and life science-focused venture capital firm, and led the analysis team at a renewable energy-focused private equity firm.
Here’s a glimpse of what you’ll learn:
- [3:27] Why focusing on clinical quality and growth is critical regardless of your transactional objectives
- [7:52] Advice for aligning practice structures with potential investment requirements
- [10:54] How working with wealth managers and tax counsel can optimize transaction outcomes
- [12:55] Understanding the various types of investment entities in healthcare
In this episode…
Are you equipped to navigate the complex landscape of healthcare transactions? With the market evolving at breakneck speed, you must optimize your practice to capitalize on growth opportunities. How can you align your practice’s goals with the ever-changing market demands?
When preparing for transactions, setting precise goals to arrange your practice’s structure for potential investments is crucial. This involves conducting an internal assessment to evaluate your growth aspirations and your practice’s position in the market. Understanding the differences between hedge funds, private equity, and venture capital ensures you can make informed decisions when exploring opportunities. Before executing any transaction, you should consult with wealth managers and tax professionals to safeguard your practice and accelerate value.
In this episode of Transaction Healthcare, Zak Eisenberg continues his conversation about healthcare business transactions. The panelists delve into strategic planning and the importance of governance and tax implications, offering a roadmap for physicians and practitioners to amplify the value and appeal of their businesses in the eyes of investors and partners.
Resources mentioned in this episode:
- Zak Eisenberg on LinkedIn
- Merritt Healthcare Advisors
- Merritt Healthcare Advisors email: contactus@merrittadvisory.com
- John Nantz on LinkedIn
- Redwood Advisors
- Barry Tanner on LinkedIn
- Integrated Oncology Network
- Bede Broome’s bio on Assured Healthcare Partners
- Geoffrey Cockrell on LinkedIn
- McGuireWoods
Sponsor for this episode…
This episode is brought to you by Merritt Healthcare Advisors.
Merritt Healthcare Advisors is an investment bank with a unique focus on healthcare providers and their businesses.
Merritt leverages the healthcare industry expertise of its owner-operators, clinicians, investors, and advisors to develop surgical facilities that perform safe, efficient, and cost-effective procedures.
To learn more, visit https://merritthealthcare.com/.
Episode Transcript
Zak Eisenberg 0:04
Hello and welcome to Transaction Healthcare. I’m Zak Eisenberg, Vice President at Merritt Healthcare Advisors. Merritt Healthcare Advisors is an investment bank with a unique focus on healthcare providers and their businesses. Transaction Healthcare as a podcast focused on addressing questions and concerns at the intersection of healthcare transactions and business. This is a special episode from a webinar we delivered. It was so interesting that we wanted to share this part with you on the podcast. It’s brought to you by Merritt Healthcare Advisors, were a healthcare focused investment bank. We don’t work on anything else, mostly with provider businesses. And usually we’re working with physician entrepreneurs, helping them to raise capital or sell their business or sometimes helping them also to buy other practices or invest in other types of ancillary service lines. We continue our conversation now with Barry Tanner, CEO of integrated oncology network, Bede Broom, Managing Director at Assured healthcare partners, Geoff Cockrell, a partner at McGuireWoods, and co chair of the firm’s private equity group, and John Nantz, founding partner of redwood advisors. Why don’t we transition now to our second topic, and we can get back to cost of capital? I think that’s a that’s a topic that is a good segue into this into this section. And Barry, why don’t we just jump into that topic with you. And you can pick up where you left off on cost of capital. And I’ll I’ll hand it over to John, to really ask some questions about this section and how our organizations can can improve their their value and get ready for transaction or whatever, whatever they’re thinking about doing.
John Nantz 1:53
Right. Great. Thanks, Zak. So we wanted to we’re going to transition to Topic number two. So Topic number one was sort of what are the key trends and forces at play, I think we did a really good conversation about that. With that as a backdrop, we want to do Topic number two. And just to give you all, all of our panelists, some context, I know a good number of people who are on this, who are listening in to us. And it’s a lot of smaller physician practice groups. So thank anywhere from one to sort of 15 doctors, I see some administrators as well, but it’s kind of kind of physician own practices, I would say on the more ambitious side, hence, they’re being on this webinar with us. So a lot of growth minded, you know, business minded physicians who have aspirations for growth, but don’t have a an outside investor yet, they may have aspirations to do it. So that’s kind of who our audience is. Topic number two is this, I want to give some advice of how can a physician group in that position, maximize value set themselves up to create value either for themselves or as part of a future transaction? So that’s kind of the headline. So why don’t we keep this more open ended? Barry, I know you and I’ve had many conversations on this topic. And I know we talk a lot about what your goals are really getting clear about what your goals are. Maybe I kick it over to you and just get your thoughts if you were talking to these physicians and physician and practice your advice for how can they create, you know, value over the long term for themselves? How can they be strategic?
Barry Tanner 3:27
So I think looking at strategically, you know, you said the in the audience or practices from one to 15. And I would just maybe, first draw contrast, in most specialties, I would say a practice of 15 could probably easily consider themselves a platform candidate. Probably the smaller practices 123 or four, perhaps, I mean, there’s a time when a lot of practices can consider themselves a platform group. But the smaller practices I genuinely think have the options are, maybe they are considering selling to a hospital, that is certainly a common occurrence these days. Maybe they are toying with the idea, what would it take for our group to become a platform? That’s a different sort of value proposition or perhaps journey? And then in some cases, maybe the smaller practices saying, you know, I think my end goal here is to become part of an existing platform to become part of one of the practices, let’s say that bead is working with and that in terms of prep, or preparing yourself for each of those journeys, I think they’re slightly different. So if you try if you were a small practice, and you want it to become part of a larger platform, because there’s lots of reasons it may be that you have better access to perhaps better payer contracts, maybe you have access to better technology, perhaps more better access to ancillaries that you couldn’t necessarily participate in on your own. So there’s lots of reasons why practices might want to become part of a larger platform. There, I would say, you know, if you’re one of those probably less worries about building your infrastructure and your governance, and probably just making sure that your practice is well managed, that your RCM is in order. And Matt, you’re maximizing your RCM value, I would say make sure that your structure is accommodating doesn’t, you know, from Geoff can talk to that more properly than I could. But I would say, Look at look, look in the mirror and say, What does my practice look like? If it’s a small practice? Am I going to be am I going to wait till I’m 67 years old to try to sell to someone? Or am I going to try to present myself to this platform as this is a wise investment because I can grow from maybe two physicians where I am today to four physicians and really be additive to the value of this platform, and it’s a good investment. So there, I would probably focus more on just succession planning and making sure that there’s a plan and the practice has sustainable value. If you were trying to become a platform, I would say that’s when you want to focus a lot more on infrastructure, is the infrastructure in place? Is it scalable? Can it can it withstand a tripling or quadrupling in size? Do you have leadership? Do you have some Do you have a strong leader in RCM, a strong leader and accounting? Are you an S corp or a C Corp or an LLC? Because that plays into it? So I would look at, I would probably focus on governance, and probably provider succession planning as well. All of those things are going to set you up to be an attractive platform. If on the other hand, you’re looking to simply become part of a larger healthcare system, part of a hospital, I would say you’re looking at, for the most part, the employee route. Don’t worry about the infrastructure. Don’t worry about the RCM that’s all going to be taken over by the hospital. So I think I think John, it all starts with trying to decide what seems to be the optimal route for your practice to travel in and, and and what will it take to get there. And once you’ve decided what route you would like to go, there’s a lot of different things that will weigh into how you can prepare yourself for that journey.
John Nantz 7:50
Be Go ahead. I was about to turn it over to you go. Sure.
Bede Broome 7:52
So I agree with everything that Barry said, I you know, I think this idea of figuring out or beginning to have the conversation within your group, and recognizing that there may be different voices within your group who some would like to go down the path of employment, others would like to go down the path of being a platform, some might just want to stay exactly where they are. And you know, sort of navigating that internal politics is a separate issue. But understanding where you want to go, I think Barry laid out a very good roadmap for kind of different choices that you one might make, depending on what path you decided. A couple other things that are maybe regardless of the path, you’re going to go down. Continue to focus on clinical quality, continue to focus on being the best physicians that you can be, you know, as much as, as a practice acquire as someone who’s partnering with practices, we focus on the economics. First and foremost, we are looking for great doctors who are highly regarded by the other physicians in the community, from a referral standpoint from their peers by just continue to be the best in your field. Right that is that sets you up. Another sort of path agnostic no regrets, move, educate yourself on kind of what what is involved in a transaction. What some of the to know Barry talked about some of the various different endpoints but also understanding the role of banker the role of an advisor. Private Equity versus others. I have been in many conversations where people are sort of fluidly moving between the terms hedge fund private equity and venture capital, and you know that they’re very different, but to someone who is less exposed Instant finance, they’re all pretty much the same. And then also, you know, I guess this isn’t entirely a path agnostic, but continue to be focused on growth. You know, I would not look at it transaction as a end point, but as a point along both your sort of personal professional and practice journey, and be constantly thinking about ways to add on new physicians, add on new staff continue to grow your practice, continue to evolve, both clinically and operationally.
John Nantz 10:36
Thank you for EB. Jeff, I think we have to get the legal perspective here. I don’t think we’d be doing our proper due diligence not to, to get your perspective to do on this. And I know, yeah, would you mind adding your thoughts as well, but from an accounting perspective, and legal and all the things that go with that? Yeah,
Geoff Cockrell 10:54
I’d say, get your house in order in some of the areas that can cause real friction in the context of transaction. You mentioned financial reporting. Shaky financial reporting is going to be a major source of friction and getting a transaction done. And that’s something that some attention and care could improve that. So give some attention there. And then another area, I would just add, where there can be material friction, and an opportunity to kind of fix some of those things, if you do it early, is to give some attention to your tax structure. I’ve been in many, many transactions, where the tax structure of the organization works just fine for how they were operating, but was not gonna work fine in the context of a transaction might be a C Corp, and paying all the income out in compensation works fine, but it’s going to be a problem in the deal. Or you may be an S corp, and you’ve got all the doctors or equal owners, but they’re being compensated differently. And in the context of a sale event, you’re going to want the sale proceeds to kind of track the kind of compensation levels, not the share counts, and you’re going to have a problem. Or you may have almost partner doctors that when you get in the transaction, and they’re not partners in the time of the sale, they’re going to feel pretty rough about that, in your avenues to fix that might be limited if you’re in the midst of a transaction, but they might be more expansive if you think about it now. So I would say from a financial and in particular tax perspective, give some thought to getting your house in order, in some ways that you can make material changes now that will be very difficult later.
Zak Eisenberg 12:55
And John, just I can’t help but add to that point on tags, we just see it all the time with clients. And by the time our clients are bringing up to us, it’s, it’s a little too late. Typically, once you’re in the midst of a transaction, or even in proximity to a transaction within a certain amount of months, it’s very difficult to actually set up the proper tax infrastructure using great counsel. But I would just recommend to anyone on the line here or anyone who’s going to listen to this as a recording online. Work with a wealth manager to help you set this up a wealth manager and great tax counsel. And do it early years before a transaction. It’s one of the first things we recommend whenever we in particular getting engaged with clients. We always make this recommendation. Some people don’t take us up on it, but spirit it’s very important.
John Nantz 13:54
Great. Thank you, Zak.
Zak Eisenberg 13:56
And that wraps up another episode of Transaction Healthcare. Hit the subscribe button to get notified when we release new conversations. And if you’re someone interested in learning more about these topics, visit us and merrittadvisory.com or send us an email at contactus@merrittadvisory.com.