Taken at the Flood

It was unusual for me to go as long as nine days with a sore throat. The average germ seldom penetrates my reasonably anti-septic existence. So it must have been the air in the plane between Boston and Fort Myers the preceding week.

Whatever the cause, a couple of Saturday mornings ago, for the first time ever, I walked into a walk-in clinic, seeking a strep test. In the space of 25 minutes, this is what happened:

  1. I signed in by putting my name on a disclaimer page and took a seat. I had no prior record with this health care provider, the Lee (County, FL) Memorial Health System. There were two other people in the waiting room.
  1. Within five minutes I was interviewed regarding my personal information (name, address, D.O.B., etc.) and insurance coverage, which was directly transcribed into an accessible on-line record.
  1. Just a minute or two later a physician’s assistant introduced herself, recorded my vital signs, and asked about my medical history, which thankfully is short and boring.
  1. By then, I was in the inner sanctum of the examining room, greeted almost immediately by the duty physician, who stopped, looked, listened, and prescribed, about as quickly as it takes to recount it. But I didn’t feel rushed – he even got in a few jabs about New England weather, which has been a favorite topic in South Florida this winter.
  1. I’d barely gotten my shirt back on when he was back to me with the printout that detailed all of my vital signs, described the two prescriptions he’d recommended, and provided the steps I should take to establish my permanent record on line.
  1. Just three minutes after I’d left the office and was driving home, my designated CVS pharmacy called (automated, of course) to say that my prescriptions would be ready in fifteen minutes if I would like to drop by.

To say that I was blown away by the efficiency and professionalism of the experience is almost an understatement. I simply couldn’t believe it. Of course, I am fortunate to have decent health insurance coverage, which gained me ready access to health care in Florida. And the fact that this branch of the clinic had been opened only 30 days reduced the foot traffic – and my wait – significantly.

But it was clear that this particular group had the health care system totally wired. I’ve just seen the future of health care, I thought. If it hadn’t been a non-profit, I’d have been lining up to invest.

What was it that got me thinking that way? Simply that everything which I could observe in my brief encounter exuded competence, concern, and commitment. From what I know as a consumer and observer of the business of health care, this group is well-positioned to succeed by riding the rising tide.

I thought about that some more last week as I began to formulate with a long-term client company a strategy for responding to an acquisition proposal from a potential strategic buyer. My client, which has just completed its fifth year of operation, has grown in fits and starts to more than $10MM in 2013 revenues without developing a history of consistent profitability. While they have a number of unique competencies that have proven valuable to several major client companies, they have yet to generate broad market interest. However, acquisition could provide them with a broader platform, greater visibility, and some redundancy for their two key technologists.

Four times during the past five years, I have had clients sell out – three to strategic buyers, one to an investor. In every case, they achieved a high multiple of EBITDA (see Draining the Swamp sidebar) as a result of selling with a rising tide, characterized by:

  • Steady recurring demand – for products/services that had gained a solid foothold in the market with continued upside potential;
  • Satisfied customers – who were pleased to testify to the significant features and benefits of the products;
  • Solid financial returns – and reporting which furnished a seamless audit trail by which to track the results of operations;
  • Excellent senior leadership – coupled with a strong manager in at least four of the five major functional areas of sales, marketing, R&D, operations, and finance and administration; and
  • Opportunism – that envisions the company’s more rapid development in one, three, and five years given the benefits added by the acquirer.

There are a lot of different reasons and ways for any company to sell, but with these factors strongly aligned, my four selling clients, none of which was considered a “high flyer,” were able to realize multiples of EBITDA ranging from 8-11 in closing the deals for their companies. On the other hand, the client that’s currently entering negotiations appears to lack the across-the-board strength to justify a high return based on historic results. Nevertheless, the CEO has a strong sense of his particular tide being “at the flood.” Thus, the challenge may be to negotiate a significant earnout/payout from the full sea to come.

Fortunately, I have rejoined the negotiations with a clear throat, my walk-in/walk-out consultation having provided a cure in 24 hours. Clearly, Lee Memorial is riding the current; it’s time to invest in their profit-making analog.