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Capital deployment: changing radiology landscape provides opportunity for investors

November 27, 2016
From the November 2016 issue of HealthCare Business News magazine

Best practices to achieve an optimal outcome
While any transaction is a complicated process and no two situations are the same, there are some key steps companies can take to increase the likelihood of success.

The first stop on the road map is choosing the right advisors. In addition to an experienced investment banker (ideally one who has deep experience advising other radiology groups), the team should include an attorney with M&A experience who specifically understands the complexity of management services organization structures, as well as an accountant or tax expert with national scope.

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As a second step, the company should complete a strategic objectives assessment with its advisers to evaluate various transaction alternatives, and work with its investment banker to build a detailed financial projection model that will hold up to intense investor scrutiny. Deal structures should explore near-term versus long-term liquidity, go-forward role, incentives and commitments of management and founders and corporate governance structure and rights of retained ownership, if applicable. Together, the team should determine a list of potential partners that share a common vision and strategy with the practice.

Next — and arguably most importantly — is creating a compelling story that highlights what differentiates the company or platform from other radiology groups in the market. In addition to sharing the positives, the team should create a list of potential issues that may arise in the due diligence process and develop strong responses to get ahead of any potential investor concerns.

Finally, companies need to ensure their house is in good order. This means organizing contracts and preparing a master summary; reviewing all legal, financial and operational documents to ensure consistency and completeness; and preparing for detailed reviews of human resources policies and benefits, technology infrastructures and billing and coding procedures. This is an unprecedented time for growth in the radiology industry. With investors paying attention, now is the time for radiology groups to understand their valuation, review their alternatives and explore opportunities to strengthen their market position.

About the author: Andrew Colbert is a managing director and founding member of Ziegler’s Healthcare Services & IT Corporate Finance Practice. Colbert has represented seven radiology groups on innovative transactions. He specializes in advising physician groups on strategic and financing alternatives, including mergers and acquisitions, capital-raising transactions and partnership development.

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