Don’t Go It Alone: One Map That Shows Why IDD Owners Need M&A Advisors

Bradley Smith ATP, CMAAManaging Director/ Partner, Vertess

by Dave Turgeon, CM&AA

The following is a map put together by our team at VERTESS:

This map identifies some of the larger intellectual and developmental disability (IDD) competitors in the country, the states in which they do business, and their owner or ownership structure. Every healthcare industry uses this tool. These maps provide valuable insight into the competitive landscape of the respective industries. They are also a way of demonstrating why a healthcare business owner would be wise to partner with a merger and acquisition (M&A) advisor when the owner decides it is time to begin pursuing a sale of the company. Along with business size and service lines, buyers are often categorized by the geographic markets in which they’re seeking acquisitions. Advisors should be aware of who is looking for acquisitions where.

Overview of the IDD Market

To understand how this relatively straightforward map serves these multiple purposes, let’s take a step back and briefly examine the current IDD marketplace. IDD is a large industry ($30 Billion of annual spend) that has been going through significant consolidation over the past 10 years. This trend is accelerating. The reason: More competitors are entering the industry with more and more capital provided primarily by private equity groups. Many sellers are transitioning to retirement after running their businesses for well over a decade.

The map does not show the dozens of other companies actively looking to acquire IDD (and other services) providers. Many medium-sized companies are actively buying smaller companies with the goal of getting bigger before they sell themselves to one of the larger companies identified on the map.

Buyers prefer to avoid directly competing with one another for acquisitions. By keeping out of each other’s way and consolidating different geographies, the prices of businesses are kept lower.

The Value of Knowledge and Experience

Every industry has experts who understand who the buyers are, what these buyers are looking for (e.g., company size, states or geographies served, services offered, growth, profitability, management teams, payor types, etc.), and what they’ll likely pay. Our team offers that expertise for business owners contemplating a sale.

We’ve found that the worst thing a seller can do is work directly with a single buyer or try to pursue a sale without understanding the complete landscape. More often than not, this leads to a low sales price and unfavorable terms. The best thing a seller can do is take the time necessary to adequately prepare for the sale and invite as many qualified buyers into the process as possible. While not a perfect comparison, you wouldn’t sell your home to a single buyer that approached you. You’d prepare the home, market it, and accept the best offer among all the interested buyers.

From a financial perspective, the results of working with a team like ours speaks for itself: We recently had a buyer increase their offer by nearly 400% to the seller once we became involved.

When the time comes for you to sell your IDD or any other healthcare business, it’s best to consult with a qualified M&A advisor. They’re in a unique position to help you get your best deal. We’d love to help you with your transaction when the time is right.