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Summer 2015

How an Investment Banker Can Make an Anesthesia Practice That Wants to Sell Become a More Attractive Acquisition Partner

Bill Britton
Co-Founder and Managing Director of Cross Keys Capital, LLC, Ft. Lauderdale, FL

There are a number of factors that impact both the relative and absolute attractiveness of a practice to a potential partner/buyer. First off, it is assumed that all anesthesiologists provide high quality clinical care, but there is much more that needs to be considered when gauging whether or not a practice is attractive. Based on Cross Keys Capital’s extensive transactional experience as the most active investment banking firm representing physicians, and more specifically anesthesiologists, on the sale of their practice, we have identified seven high-level areas of focus that buyers use to evaluate the overall attractiveness of a practice.

  1. Corporate Governance/Leadership. The board of directors needs to be comprised of high-quality, well respected physicians, medical directors and executives who have leadership experience in operating and guiding their group. This is a critical component when dealing with prospective buyers as a lack of leadership and structure could potentially be perceived as being disorganized, raising concerns to buyers on their ability to execute a transaction. Also, a formal board and executive roles within a practice need to be clearly defined, as well as identifying physicians who have taken on leadership or board positions within the hospital.
  2. Size of Practice. Factors that determine size are evaluated individually and collectively in order to assess the overall attractiveness of a practice by potential buyers. Typically, these are bucketed into two categories: (i) operational (e.g., revenue, EBITDA, case volume, unit volume, etc.) and (ii) organizational (e.g., number of partner and non-partner physicians, CRNAs, number of facilities, number of anesthetizing locations, etc.) metrics that are then analyzed from both a historical and projected basis to assess the financial trends. 
  3. Strength of Hospital Relationships. Existing hospital relationships are a key value driver for anesthesiology practices, as well as the terms and length of existing contracts. Another critical component is how long the practice has been serving the hospital and the strength of the relationships with the hospital administration and senior leaders. Obviously, tenure with a longer duration is typically perceived as a “stickier” relationship, although hospital systems have been sending their services through an RFP risk. Also, relationships with surgeons and other specialists are critical. 
  4. Managed Care Providers and Payer Mix. Practices’ managed care providers and payer mix will play a significant role when evaluating attractiveness. Practices’ geographic location, diversity of managed care providers, payer rates and payer mix are critical during the evaluation.
  5. Profitability of the Practice. This is a key area of focus by buyers as it dictates whether the target group is a ‘business’ or a ‘practice.’ The major profitability drivers to a practice are: (i) types of payers (e.g., government, managed care, par vs. non-par, etc.), (ii) financial support (e.g., stipends, subsidies, revenue guarantee, etc.), (iii) patient population and demographics, (iv) staffing model (e.g., care team, physician only, follow the doctor, etc.), (v) billing and coding (e.g., internal billing vs. outsourced), (vi) back office/ administrative support and (vii) data capture. All of these drivers can increase or decrease attractiveness depending on where the practices strengths and weaknesses are.
  6. Clinical Quality. HIGH QUALITY is a given.
  7. Growth Initiatives. Practices’ growth initiatives are where buyers evaluate the practices’ ability to scale and integrate as a business. Practices need to ask themselves: Has our practice demonstrated growth? How have we gone about it? What future opportunities do we see?

In order to be an attractive practice, our recommendation would be to focus on strengthening and improving leadership roles, implementing the proper governance for your group, solidifying facilities’ contracts, building a cohesive culture within the group, establishing an internal audit of coding and compliance and evaluating the merits of partnership track vs. employed physicians. We believe maintaining excellent control over these critical components will not only streamline your practice and operate more efficiently but actually will elevate it to a true business. In conclusion, because investment bankers possess intimate knowledge of the triggers for all active buyers of anesthesiology practices, hiring a banker can help you understand and identify who is the best potential buyer for your group while maximizing and protecting the value of your practice.

Bill Britton is Co-Founder and Managing Director of Cross Keys Capital, LLC, Ft. Lauderdale, FL. He is a Wall Street trained investment banker with a track record of success in M&A and corporate finance with Morgan Stanley and Fortune 500 companies. He leads the Cross Keys Capital Healthcare Services team working with physician owned practice groups throughout the country. Mr. Britton has represented over 25 anesthesiology groups nationwide, serving as the sell-side advisor in facilitating transactions with a multitude of strategic and financial buyers. In 2013, Mr. Britton and Cross Keys Capital received the prestigious M&A Advisor Healthcare Deal of the Year Award for the firm’s advisory role in representing Broad Anesthesia Associates, LLC and Mid-Florida Anesthesia Associates, Inc. in their sale to Goldman Sachs Private Capital Investing, completing the formation of Resolute Anesthesia and Pain Solutions, LLC. He is a graduate of the Wharton School of Business. He can be reached at