Download the checklist to guide your healthcare business through buyer diligence step by step.
This article offers a checklist for healthcare operators preparing for buyer due diligence. It stresses proactive preparation to build trust, sustain deal momentum, and justify valuations. The checklist spans six areas: financials (e.g., statements, QoE), operations (e.g., org charts), compliance (e.g., licenses), legal (e.g., contracts), payors/referrals (e.g., contracts, denials), and technology (e.g., EMR, HIPAA).
Today, buyers in the lower-middle market are more sophisticated than ever before. Whether the acquirer is a strategic operator or private equity group, you can expect deep scrutiny into your financials, compliance practices, operational structure, legal standing, and more. If you're considering a sale (now or in the future), preparing for buyer assessment across each of these categories isn't optional; it's essential to reach a successful outcome.
Studies show that over 70% of M&A processes fail. The more prepared you are prior to engaging in a sale process, the better you'll be positioned to engage with buyer scrutiny, provide requested documents and data in a timely manner, and ultimately, create a defensible valuation. Taking the following proactive steps prior to engaging with buyers, will allow you to build trust with interested parties, maintain momentum in negotiations and diligence, and avoid last-minute surprises that can erode trust, diminish value, or terminate a deal in its entirety.
Here is a comprehensive checklist of what to expect and how to prepare:
Financial Documentation
Financial clarity is the foundation of valuation and buyer trust. Clean, well-organized financials allow buyers to validate your performance quickly and reduce the chance of any late-process renegotiation tactics or deal fallout. One of the first steps a buyer will take when assessing an acquisition opportunity will be to perform a detailed financial review to validate reported earnings and assess risk.
Sellers should be ready with the following documents before entering market:
- At least three years of financial statements - P&Ls and Balance Sheets (Revenue breakdowns by payor and service line)
- General Ledger exports
- Tax Returns (last 3 years)
- Normalized EBITDA analysis with clear, defensible addbacks
- A/R & Aging reports
- Payroll registers and contractor details
While this is not a comprehensive list, it will provide a thorough and accurate picture of your business’s performance over the previous 3 years.
Before ever engaging with a buyer, it is vital to ensure your financials are accurate, clean, and ideally, reviewed by a third party. Many sellers, as a means to bolster the presentation of their company, opt to conduct a Quality of Earnings (QoE) analysis, which proactively addresses common buyer questions and presents your business financial statements in a credible, third-party-vetted format.
At M&A Healthcare Advisors, we maintain active relationships with trusted QoE providers who specialize in healthcare and understand the nuances of revenue cycle, payor dynamics, and cost structure unique to this sector.
For more details on our trusted resources, contact us for further information.
Operational Details
Buyers want assurance that the business can function smoothly without the seller’s daily involvement. Demonstrating efficient and scalable operations increases the perceived value and reduces post-close transition risks. Providing operational overviews and visibility can allow buyers to effectively evaluate scalability, business infrastructure, and utilization of management.
Key documents to assist in operational assessment include:
- Organizational chart and leadership bios
- Headcount by role (FTEs vs. contractors)
- Service area maps or referral zone/category breakdowns
- Volume trends by location, program, service, etc.
- Intake, scheduling, and billing workflow documentation
The more you can show systematized and efficient operations, the more transferable (and valuable) your business can appear to potential acquirers.
Compliance and Licensure
In healthcare, regulatory compliance is non-negotiable. Readiness in this area can potentially mitigate risk for buyers and keeps the deal from stalling during due diligence. Healthcare transactions involve significant regulatory diligence, given the nature of the service and the payors involved.
Expect to provide:
- State licenses and accreditations (e.g., JCAHO, CHAP, ACHC)
- Compliance policies and training records
- Internal or external audit results (Corrective action plans, if applicable)
- CMS surveys and results
- Any material notices or investigations
Having your compliance processes and documents in order not only avoids delays but gives buyers confidence in the business's risk profile.
Legal and Corporate Governance
Clear documentation of your legal and corporate structure helps ensure a clean transfer of ownership and reduces delays tied to legal uncertainty. Buyers will want to confirm your legal structure and identify any exposure or barriers to closing the transaction.
Be ready with:
- Articles of incorporation and bylaws/operating agreement
- Board or owner meeting minutes
- Ownership cap table and relevant equity agreements
- Contracts with vendors, landlords, and referral partners
- Documentation of any active or potential litigation, claims, or liens
Legal readiness can be a make-or-break factor in diligence. At M&A Healthcare Advisors, we maintain a curated network of healthcare-focused M&A attorneys who can help prepare and review key materials, negotiate terms, and avoid preventable delays. Learn more about the role of a legal advisor before and during a sale process in our article: The Role of Legal Advisors in Healthcare M&A.
Payor and Referral Dynamics
Revenue reliability and payor diversity are central to sustaining and projecting future earnings. Buyers want to know your referral sources and payors are stable. Demonstrating stable revenue channels and diversified referral sources is critical to achieving a valuation at the height of the market.
Prepare the following data:
- Top referral sources (by category) and identify any revenue concentration or risks
- Payor contracts and reimbursement rates
- Credentialing documentation
- Reimbursement Recoupments (Historical denial rates and appeals performance)
Potential Insurance Clawbacks (Out-of-network billing exposure, if applicable)
Technology Infrastructure
Buyers look for scalable systems that ensure operational efficiency and compliance. A strong tech stack increases confidence in future growth and integrations. Modern buyers often consider the efficiency and organization of your tech stack as part of the value of the organization.
Be prepared to share:
- EMR/EHR system details
- Billing and RCM platforms
- Software for scheduling, HR, or reporting
- Data security protocols and HIPAA safeguards
Case Study: How Thorough Preparation Led On My Care Home Health to a Successful Sale
In our successful transaction representing On My Care Home Health, our team utilized the framework above to guide ownership to take the necessary steps to prepare their financial documents for buyer scrutiny, review legal documents and potential liabilities, and assess any necessary operational and compliance clean-up.
Following these steps prior to formally engaging with buyers enabled our team to effectively capture a defensible financial picture and operational profile of the business, generating over 70 interested buyers and resulting in a total of 6 qualified offers to choose from for further negotiations.
The preparation conducted led to an efficient due diligence process over an 8 month period, resulting in a valuation above market average with minimal complications or stalls during the due diligence process.
How M&A Healthcare Advisors Supports Seller Preparation
Preparing for a sale process is not simply about generating the latest financial information and sharing it with interested buyers — it’s about properly positioning your business to command strong offers and minimize delays due to lack of documentation. At M&A Healthcare Advisors, we offer tailored M&A Consultation services that help owners:
- Evaluate exit readiness across all functional areas
- Conduct a detailed, defensible EBITDA assessment to better determine your current market value
- Identify risks and challenges to achieving a successful sale, long before buyers do
- Organize and assess company data, resulting in the creation of a detailed memorandum highlighting the business opportunity
Our M&A Consultation services, paired with our Quality of Earnings (QoE) partners and trusted M&A Attorney resources, will ensure you enter the market with credibility, control, and clarity.
Final Thoughts
Selling your business doesn’t have to be a frantic and uncertain process. With the right preparation and foresight, it becomes an opportunity to demonstrate strength and drive value. Whether you’re preparing for a transaction this year or simply want to be ready down the line, it is never too early to get organized and identify any gaps in your organization. In many cases, capturing the data and documents above can help to improve your organizational performance and better position your value for when it comes time to sell.
Download our free checklist to begin your sale journey and contact us to discuss how we can help you prepare in the meantime.
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This material is intended for information purposes only and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Unless otherwise stated, all views or opinions herein are solely those of the author(s), and thus any view, comments, or outlook expressed in this communication may differ substantially from any similar material issued by other persons or entities. The information contained in this communication is based on generally available information and although obtained from sources believed to be reliable, its accuracy and completeness cannot be assured and such information may be incomplete or condensed. The information in this communication does not constitute tax, financial, or legal advice.
