Reflections After the Care Show- How is the Healthcare Market shaping up for 2013?

A common question I was asked over the two days at the Care Show in Bournemouth was how the Healthcare market was comparing against other sectors, and the forecast for M&A in Healthcare for 2013. 

When selling your business UK Healthcare remains a desirable market due to the continuing demographics of the UK, and the opportunities that remain within the industry for growth in conjunction with offering a high quality service to clients, though there are several areas of potential concern for Healthcare owners and those considering investing in the industry.

The first is that if your Care Home or Home Care Agency is reliant on Local Authority work, namely receiving referrals from the local Councils to ensure your Home is running at full occupancy or that you have sufficient Domiciliary Care clients to remain profitable, then your Company is only as good as your relationship with the Local Authority and only as profitable as the Charge Rates the Local Authority is willing to offer.  Numerous Healthcare Owners whom I have met over the last few years have told me of the increasing pressures they are receiving from Local Authorities to reduce Charge Rates whilst offering the same level of service.  Putting this into simple Accountancy terms on your Company’s Profit & Loss this means for every £ taken off the Charge Rate and in effect your Turnover, this drops straight off your bottom line profit.  This ultimately squeezes the margins that you are working on, and brings into question whether the historic quality levels can be maintained, or whether the Company will need to reduce the level of service clients have grown accustomed to receiving in order to remain in business.  These are issues which rightly concern CQC and Business Owners alike, and why more and more Vendors are proactively looking to expand into the Private market.

The second point is relating to the short term attractiveness of the Healthcare sector, when compared to other external industries or even on a regionalised basis within the Care industry.  It is common at present for different Local Authorities to offer different Charge Rates for exactly the same service, resulting in Companies being able to achieve variances of over £10 an hour in different parts of the Country.  Considering an external Investors criteria for one moment, would you be more drawn to acquire a Company in a higher Charge Rate area, or one that offered exactly the same type of care, required the same effort, time and work, but would ultimately be 30-40% less profitable?  The main criteria of Acquirers when assessing a Healthcare opportunity are quality and profit; if one of these is significantly below the average then the interest, along with the value, will diminish accordingly.  The other aspect is to assess the attractiveness in the short to medium term for external investors when comparing the Healthcare industry to other sectors such as IT or Oil & Gas.  With the well documented Government agenda to reduce Public spending, and Healthcare seen as one area where cost savings can be made, Investors are reviewing and calculating quicker return on investments being made from these ‘recession proof’ sectors.  This reduces the number of external parties acquiring into the market, and as demand reduces, so does the values achieved within the market.

There were a few highlights in the Healthcare M&A world in 2012, notably the acquisition of Harmoni by Care UK and Enara by Mitie, the latter hopefully the instigator of Facilities Management Companies looking to broaden into the Healthcare market in 2013.  However the main issue holding back the number of M&A deals to pre-2008 levels remains funding.  Over the two days of the show I spoke with numerous Bank Managers for all the main high street lenders, and the story was the same for all, one of cautious optimism for the sector, an understanding of the restrictions preventing the release of equity, but ultimately a sense that their hands would be tied for some years.  This leads to an issue whereby individuals who have worked within the Care sector for numerous years, who are driven by ensuring quality levels are high and wish to go alone and branch out for themselves come up against a brick wall when attempting to secure funds, and as a ‘first time buyer’, with limited assets, Banks require this individual to raise personally anywhere up to 65% of the total consideration.  In today’s climate this is unrealistic, and therefore means the number of ‘care people’ becoming owners is reducing year on year.  This void is filled by Venture Capitalists, Private Equity Firms and Investment Consortiums on ‘buy and build’ strategies; however their focus is on maximising profits, not necessarily on improving care quality.

So in summary the Healthcare sector at present remains a sector of great interest to Purchasers, offering potentially high levels of return and in one of the few markets where predictions of growth for the next 10-20 years can be justified.  However in the short term, with the memory of a recession still in the back of people’s minds, and the continued sluggish nature of the economy and continued government cutbacks, the sector is on a knife edge.  If you are selling your business UK Care Purchasers and the M&A market in general are continuing to tread with caution until these concerns are alleviated.

Adam Croft, Senior Business Broker

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Axis to attend Care Show 2013!

Come and Meet the Team at the Bournemouth Care Show – 19-20th March 2013

Following the success of last year’s show we are delighted to announce that we will be exhibiting at the Bournemouth Care Show again this March.  Please put a date in your diary and come and meet us!

Over the years we have built up a strong presence within the Healthcare sector enabling business owners to realize the full sales potential of their businesses and gain the maximum sales value.  Whether you are planning to sell your business now or in the future we would be happy to hold informal, no obligation discussions with you during the show.

We have secured the same great space as last year, just outside the seminar rooms in Windsor Hall, so please come and meet the team.

To read the full press release please click here: Press Release_ care show 2013.pdf

Robin Boxall-Hunt, Managing Director of Axis Partnership
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I Want To Sell My Business Fast- Avoiding Procrastination

I want to sell my business fast- how can I speed things up?

Money loves speed. On the other hand procrastination kills speed (and takes us away from potential money we could make!). If I'm determined to sell my business fast, I need to keep my productivity in gathering information and marketing my business up. 

Here are 11 powerful tips to overcome procrastination and speed up your productivity:

1. Bite Size tasks: Make each task to be accomplished small enough to get started. Even writing a book can start with a small task like outlining or writing the first few words. If you are planning to run and find it difficult to get started, forget about the whole running process and commit to just one simple task – put your running shoes on. More often than not you will end up doing a run.
2. Kill perfection: Trying to get it perfect will stop you in your tracks. It does not mean you have to do a bad job. Start the task or project in any form to get it finished. When it’s finished you can look for ways to improve or make it better.
3. Change your ‘internal’ dialogue: Rather than say ‘I hate doing it’ why not say ‘I choose to do it’.  This will empower you to start it off even though you may not like the task (like tax returns etc). If you are having a bad day, it is easy to put off doing things as you are not in the ‘mood’. Don’t let the ‘mood’ control your life. Change the dialog to ‘I will start this now’.
4. Get a reward: Set rewards for accomplishments. These rewards can be simple treats at the end of tasks. I do not like sitting in my office for more than 45 minutes. So if I have to do something that is going to take 60 minutes, I look forward to finishing it so that I can treat my self to a brisk walk and cappuccino.
5. No distractions: You are in control of everything that distracts you. Turn the phone off (unless your task involves using the phone), move away from all ‘surfing’ devices and get on with your task. If you are likely to be interrupted by co-workers and visitors make arrangements not to be disturbed.
6. Worship your diary: Block out time for all the important tasks in your diary and set reminders if necessary. Let the diary guide your day. Get the key tasks done as early as possible as this allows you to be flexible later in the day to ‘react’ to unexpected events.
7. Get accountability:  Have someone (a colleague, co-worker or a coach) hold you accountable for finishing certain tasks. I share my diary with my coach. I hate giving excuses to her as to why I did not complete some tasks. This motivates to get on with it.
8. Review your time: Each day, review what you have accomplished. This is one of the most frightening exercises. You will find hours within the day that you cannot account for in terms of accomplishments. Our life is short and too precious to be wasted by procrastinating.
9. Clear Clutter: Although procrastination is function of your mind, physical clutter around you adds to your mental clutter. Your desk (or desktop) should be a place for job in hand and clutter free. Clutter adds to your frenetic mind and nothing else. Get rid of it.
10. No multi-tasking: Successful multi-tasking is a myth. It gives us an illusion that we are contributing towards productivity.  It is there for overly scheduled and stressed-out people to feel productive and efficient. Under the illusion of multi-tasking we are in fact ‘serial tasking’. That is jumping from one task to another but think we are multi-taking (working on all those tasks at the same time!). Focus on one thing at a time until it is done!
11. Make a decision: Make a deliberate decision to fight procrastination and become a high productivity person. 

Richard Haden-Scott, CEO of Axis Partnership

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Is Private Equity the Best Deal?

In the current press we hear a lot about financial buyers and about how they are filling the void left from the Banks restricting funding. However, when deciding how to sell your Company often a strategic buyer - a bigger Company whose goals complement yours - is the best buyer for you, as they will pay a higher value and require you less post sale.

In the world of middle-market acquisitions, there are generally two kinds of buyers. Financial investors, like Private Equity groups or Venture Capitalists, are in the business of buying and selling Companies. A strategic acquirer, on the other hand, is another Company in your industry that thinks your business would be a great addition for them to help grow and strengthen their market share.

When you’re ready to sell, a strategic acquirer can be the best match for you, but it takes a little more work to get to them. Here’s why:

1) Buying companies is not a strategic acquirer’s primary focus

Financial acquirers are in the business of investing in companies and seeing a return on that investment. Day in and day out, they look at confidential information memorandums, send out indications of interest and letters of intent, and negotiate the purchase or sale of portfolio companies. The process flows (comparatively) smoothly because financial acquirers literally exist only to find companies to buy and sell.

Strategic acquirers, on the other hand, have plenty of other things to do. Their primary purpose is to maximize the value and profits for shareholders. They're busy developing new product lines, growing their customer base, coming up with new advertising campaigns, conducting market research. These Buyers are spending their time trying to make their profit & loss reports look good, not focusing on buying and selling smaller companies, so it’s harder to get their time and attention.

2) It's hard to find the right person to talk to

Take a look at the website of any private equity group, and within 30 seconds you'll be able to find full contact information for each of their partners. If you’re lucky, the partners will be neatly sorted by industry specialty. And you can get them to take your calls and look at your confidential information memorandum without too much hassle. After all, that's what they're there to do.

By contrast, reaching out to a strategic acquirer can be extremely difficult. Let's say your Company places specialist engineers for the aerospace industry. You want to sell the Company and you’re pretty sure that Hays would want to take a look at you. Do you know how to sell your Company to them? Where do you start?

Well, Hays has divisions and different Companies who specialise in different placements, whether that be commercial aerospace, defence and government contracting, space, security and technology solutions, to name a few.  Each Company is autonomous and has its own goals, strategies, business development teams, relationships with corporate management, and political manoeuvring. And each division may approach acquisitions differently.  In one department, the business development people may be actively charged with seeking new companies to buy; in another, they may be limited to managing the process.

It takes a lot of research and legwork to drill down into each of these departments, determine your best contact points, and try to actually reach those people. Three FDs may slam the door in your face, but the fourth could be looking for a Company exactly like yours to expand their particular section of the Group.

Then you get to do it all over again for Michael Page, Reed, Impellam Group and anyone else you think might be interested.

The extra work is worth it. Here’s why.

1) You’re much more likely to get a deal completed

Once you’ve developed a strong relationship with the right person at a strategic acquirer, you instantly have the best internal flag-carrier you could ask for. This person will be an extraordinarily strong champion for you, and for this deal.  He or she had to convince the higher-ups this deal is absolutely essential. If the deal falls apart, your flag-carrier’s managers are going to be asking what went wrong: “Didn’t you tell us four months ago that we just had to buy this company before one of our competitors did?”

A Private Equity group, by contrast, will look at many companies, and start discussing what a deal might look like with quite a few of them. But they’ll only close a small number. They know that there’s another Company, and another deal, right around the corner. Once a strategic buyer starts a process, they have a very strong incentive to see the deal through.

2) The strategic acquirer is likely to pay more

The best way to get a premium price for your Company is to put buyers in competition with each other. A Private Equity group certainly doesn’t want to pass on a golden investment and then see one of their competitors take advantage of it, but they know there will be plenty more companies to look at. By contrast, if both Impellam and Hays need the exact kind of Recruitment you do, and both want to bring that capability in-house, they’re not going to have that many options. Rather than being a commodity, your Company is a unique service provider that is going to give one player a competitive advantage over the other.

The bottom line is that a bigger player in your industry is likely to care more about your particular Company, and this particular deal, than a financial investor would. Private Equity groups are more focused on the numbers: They want a profitable Company in a good industry, and that’s about it. When deciding how to sell your Company and what buyers to pursue, a strategic acquirer knows your product, sees the synergies between what you do and what they do, and wants to make the deal happen because of what it can do for their strategy and bottom line. They want to integrate you into their business model. All that means a higher price and a better chance that the deal will close.

Adam Croft, Senior Business Broker

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A Video Overview- How Can Axis Assist Me When I Sell My Business?

How Can I Sell My Business with Axis?

Here at Axis Partnership we pride ourselves on our ability to assist people considering an exit as professional Business Brokers.  This video is a brief overview to show how the assistance of an experienced agent working with you, your legal team and your accountants can help smooth the transition from initial contact and preparation through valuation, the commencement of marketing, introductions, due diligence and completion of sale.  

Robin Boxall-Hunt, Managing Director of Axis Partnership

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I Want To Sell My Business Via A Management Buy-Out (MBO)

I Want To Sell My Business To My Management Team

Traditionally it is well documented that less than one in five business owners would consider selling their businesses to their management team.  The reasons are obvious – Management Buy Outs (MBO’s) need careful thought and planning.  However since 2008 and the impact on appetite and demand in the Mergers & Acquisitions sector as a whole, the perception of MBO’s have begun to change and they have become more popular with a number of key advantages.  As a Business Owner, do the benefits of an MBO outweigh the potential risks?

Advantages Of An MBO

So what are the advantages of an MBO?  Rather than have to go to the market place, the Buyer has instantly been found, and the Vendor will be confident that they have the same business ethics and ethos to ensure client relationships are preserved and the name of the Company and legacy is maintained.  Also one of the main advantages is that confidentiality can easily be contained in-house, removing the risk of competitors finding out that the Company is on the general market and any detriment affect from this relating to clients or staff.  MBO’s allow Vendors to be more comfortable about structuring a deal over a longer period of time than they would do with an unknown 3rd party, ensuring there is minimal disruption.  The risk involved in the change of power can therefore be minimised.

Disadvantages Of An MBO

As with everything in business there is another side to the argument, with the main case against MBO’s being that as the Vendor you are limiting the competitive number of Buyers to just one!  A Company being marketed for sale in the open market could easily generate 8-10 potential purchasers, where an offer price could be significantly higher due to synergetic or competitive reasons.  Funding is also a common problem with MBO’s and can be the main cause for the deal to fail, whereas Buyers generated from open marketing would need to provide proof of funding, normally before serious negotiations even get started.  Often Vendors find themselves having to agree to a lower value deal with the MBO team than the Company is actually worth, due to this being the maximum amount they can raise.  Also a point for note is should discussions get underway for an MBO then there could be the risk of the management team not keeping their eye on the ball and the Company’s current performance could begin to suffer.  Alternatively, and even more or a concern to a Vendor, is that should the sale fall through, the Company would be left with a severely demotivated management team.  If the Vendor then looks to take the Company to the general market this instability would devalue the Company accordingly.

The Key to Success

The starting point is to ascertain whether or not the management team will have the appetite, ambition and leadership capability to grow the business, followed by access to finance, as this is the critical part! Anyone thinking "I want to sell my business," should seek specialist help and advice to ensure that a succession plan is carefully implemented so that a flexible, staged exit can be managed, ensuring that sensitive issues and individual aspirations can be dealt with. Working alongside experts in this field can ensure that the business is made as attractive as possible in order to achieve the necessary finance and of course, allowing the Vendor to achieve the full value of their Company!

Adam Croft, Senior Business Broker

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A Video On Due Diligence- What Happens Once A Deal Is Agreed?

When you sell your business, agreeing a deal isn't the end.

At Axis, we do more than just introduce you to buyers, we stay with you throughout the whole of the Due Diligence process.  When you sell your business, you need to be aware that there's still a great deal of legwork, preparation and negotiation as buyer's agents go through your business with a fine tooth comb after you accept their offer.  This video explains the ways Axis can assist you during this period, and explains some of the reasons we may be needed.

Robin Boxall-Hunt, Managing Director of Axis Partnership

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