How to Sell A Healthcare Company

Healthcare Business Sales in South Florida

Healthcare related businesses in the South Florida market are always in demand. Our area’s high Medicare and senior citizen population, along with the constant influx of baby boomers, make healthcare companies in South Florida a hot commodity among many investors and entrepreneurs. Home-healthcare companies, physical therapy centers, nurse registries, and Durable Medical Equipment (DME) firms are some of these sought after healthcare related companies.

Key Issues for Selling Healthcare Companies:

  •  Licensure transfer
  •  Non-compete agreement with key staff
  •  How the healthcare company procures its patients

Licensure Transfer Issues When Selling Healthcare Companies

Many healthcare related companies require AHCA (Agency for Health Care Administration) approval to transfer the license from the seller to the buyer. Home-health care companies and nurse registries allow a Change of Ownership Application (CHOW) to complete the transfer. Transferring a healthcare license can be a lengthy process taking up to several months. Questions arise such as who is in charge of the business during this delay, whether money needs to be held in escrow pending the transfer, and whether the buyer can properly comply with the document request from AHCA and be eligible to assume ownership.

Delays in License Transfer When Selling Healthcare Company

Some sellers will not have the patience to deal with ill-informed buyers who may delay the process or jeopardize the transfer…so buyers beware! It is also relatively common for the parties to conduct a stock purchase deal (rather than an asset purchase deal) to avoid delay and bureaucratic headaches altogether. A stock purchase deal is when the buyer purchases the actual corporate entity of the seller rather than the typical asset purchase deal when the buyer purchases the assets of the seller’s corporate entity. A stock purchase deal allows for a faster approval process because the seller’s corporate entity is kept in place as being duly registered with AHCA. This should be negotiated by the parties and fully explored during the formal due diligence process.

Significance of Non-Compete with Staff 

  • Part of a buyer’s request when purchasing a healthcare related business may be that the company’s staff sign non-compete agreements.
  • Such non-compete agreements are meant to protect the buyer from facing future competition from the staff members inherited from the seller.
  • Many nurse registries or home health companies have key personnel such as nursing supervisors, marketers, or executives that are asked to sign non-compete agreements by the buyer.
  • Without the proper protections afforded by a non-compete agreement, the buyer is afraid that these employees may simply take the company’s clients or referral sources and start a new company.
  • Such issues must be delicately negotiated and handled with care before it becomes a problem.
  • Buyers must understand that it is generally not standard in the industry for such individuals (particularly if they are actual caregivers) to sign non-compete agreements.

Smooth Transfer of Referral Sources

When a healthcare company such as a physical therapy center gets all their referrals from the owner’s fishing buddies, buyers will justifiably wonder what will happen when the seller is no longer there! When the owner’s personal relationships are the only way  that a healthcare company procures patients, then that will pose a problem for the business valuation. Buyers will fear the loss of significant revenue after the sale. The seller and their business broker must plan for this and have a plan in place to ensure a smooth transition in the referral sources from the seller to the buyer.

Seller May Stay Longer to Help Transfer Referral Sources After The Sale

Sometimes the seller may agree to stay on for a year or more in order to give sufficient time to properly introduce the buyer to the referral sources. Sellers must be made aware that a buyer will want some assurances that the patients stay with the business. The valuation of healthcare companies critically depends on maintaining the relationships with patient referral sources after the sale.

The sale of a healthcare company should only be entrusted to a professional business broker with the experience and expertise required to anticipate the unique issues and challenges faced when confidentially selling healthcare companies.

Give Martin at Five Star Business Brokers of Palm Beach County a call today with questions about evaluating your healthcare related business.