Selling a Company
Q&A with TripleTree Managing Director Joe Schiesl
When is the best time to sell a company?
The Irish have a saying that it’s always better to build a roof when the sun is shining. Similarly, it is generally best to sell a company when it is profitable and growing. Healthcare is a large, complicated and highly competitive industry. Distribution channels are tightly controlled and companies that are emerging with proven solutions can often accelerate growth and multiply growth through strategic mergers and acquisitions. Premium valuations are achieved when companies are still demonstrating a strong growth trajectory, rather than peaking or declining. Recapitalization by selling a portion of the business also makes the most sense when the company’s performance and value is high. This can help diversify risk and provide an early return for founders and investors. Our market knowledge and relationships across a broad network of strategic and financial acquirers help companies determine if the timing is right.
How are companies valued in a transaction?
The valuation process is complex and varies for each company and transaction. Beyond an intensive analysis of the fundamental financial and operational factors, TripleTree applies our market knowledge and strategic advisory skills to help clients identify untapped opportunities and intangible factors that will increase growth projections and value. The multiples and comparable transactions in an industry can provide a baseline but many other factors must be considered. Multiples and valuations in the public market are not always relevant or relative for selling privately-held companies. Our unique, research-driven approach combined with our ability to develop a compelling investment proposition and deliver it to the right audience help maximize valuations. Ultimately, the bottom line is negotiating the right deal for our client to meet both their financial and non-financial objectives. It is both an art and a science – and TripleTree is a master of both.
How does TripleTree help clients prepare for a transaction?
Our strategic advisory services help each client assess the strengths, weaknesses, opportunities and threats of their business to maximize assets and minimize liabilities. Following an initial financial audit, many companies invest in infrastructure and appropriate management, focusing on their core competencies and solutions. It is very important that companies double-down before, during and after the transaction process. Great outcomes are always driven by performance. TripleTree works closely with our clients to eliminate distractions throughout our engagements so they can stay focused on running their business. We’ve earned the trust and praise of our clients by consistently achieving exceptional outcomes. And, we’ve developed a solid reputation within the buyer community as an investment bank that represents innovative, best-in-class companies with quality management teams and solid operations. By partnering with our clients and educating them prior to engagement and throughout each stage of the transaction process, they are able to confidently execute knowing that we maintain open communications and represent their best interests at all times. Generally, with our advisory team driving the process, the only time consuming period of a transaction for clients are the final stages prior to closing.
What are the most important considerations in selecting an investment bank?
It is most important to find a bank that you trust will deliver the best outcome for your business based upon their transactional expertise and healthcare industry experience. Just as we conduct a significant amount of due diligence to determine whether or not each prospective client engagement is a good fit for TripleTree, we strongly suggest all companies and financial sponsors closely scrutinize investment banks. Focus on transactions in similar markets with similar characteristics. When checking references, I’d ask the former clients of every bank to answer some basic questions: Did they do what they said they were going to do? Did the deal they negotiated meet both your financial and non-financial objectives? Were the final figures and terms of your deal consistent with those negotiated in the original Letter of Intent? And, when interviewing firms, I’d ask them another straight-forward set of questions: How many of your engagements do not end in closed transactions? What are the reasons some engagements do not end in transactions? Who, specifically, from your team will be actively working on our behalf? How much relevant experience and expertise does this team offer? Also, it is important to get a strong sense of how the firm plans to tell your story – and to whom? Make sure to discuss all options including your decision to not sell. All investment banks should do a good job of clearly and honestly setting expectations up-front but this often isn’t the case. Don’t select the bank with the highest proposed valuation for your business. Make sure there is ample evidence to suggest they can achieve the outcome you desire. TripleTree has continuously challenged the status quo in our industry to raise the bar in terms of our services, integrity and outcomes. We do what we say we’re going to do.