Bass, Berry & Sims attorney Angela Humphreys co-presented at a breakfast program, “Diligence Considerations and Risk Management in Healthcare M&A.” Fellow panelists included Will FitzSimons, Senior Managing Director at Arthur J. Gallagher & Co.; Lisa T. Nix, CPA, Practice Leader of Transaction Advisory Services at LBMC; and David M. Pontius, Vice President at MTS Health Investors.
The event provided attendees practical advice on how to mitigate risks in healthcare transactions. Key takeaways included:
- Valuations are at an all-time high. Buyers do not want to pay an A+ price for a B- asset, which makes diligence key.
- Deals are running longer before exclusivity. It is a very competitive market.
- 34% of all private equity transactions in the first half of 2017 have Reps & Warranties insurance. This is gaining traction in the healthcare space.
- Don’t lose sight of the issues: identify debt-like liabilities early on.
- Engage your team early for billing and coding, financial, and legal diligence and consider a phased approach starting with billing and coding to detect any compliance issues at the beginning.
- Sell-side diligence before a transaction launches is becoming more common as dealmakers are recognizing the benefits.
- Background checks are a key component of due diligence.
- Deals rarely go astray as a result of legal issues, it is almost always a matter of valuation, making the front-end due diligence critical in setting up a higher probability for success.