The Power of Financial Preparation


In episode 10 of the M&A Healthcare Insights Podcast, host Andre Ulloa dives into the power of financial preparation in healthcare M&A with guests Aaron Cook and Jeff Michelson from CohnReznick. They discuss the vital role of financial due diligence, the role of a quality of earnings (QofE) analysis, and current healthcare M&A trends.

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In the latest episode of the M&A Healthcare Insights Podcast, Andre Ulloa, Founder and Managing Director at M&A Healthcare Advisors, dives into the power of financial preparation in healthcare M&A with guests Aaron Cook and Jeff Michelson from CohnReznick. They discuss the vital role of financial due diligence, the role of a quality of earnings (QofE) analysis, and current healthcare M&A trends.

The conversation highlights the importance of early preparation, the evolving landscape of healthcare transactions, and how sellers can position themselves to attract the best possible offers. Whether you’re a healthcare business owner contemplating a sale or an investor, this episode offers key insights into navigating the M&A process.

Timeline of Main Points

  •  The Power of Financial Preparation
  • 07:56 The Role of a Quality of Earnings (QofE)
  • 17:32 The Difference Between Standard Accounting and Transactional Accounting
  • 19:57 The Focus on EBITDA in a Transaction
  • 23:06 Evolution of the QofE Process
  • 28:59 The Significance of Having Expert Support
  • 31:00 The Importance of Compliance in M&A
  • 32:20 When to Bring In Financial Support
  • 40:00 The Connection Between Financial Diligence and Clinical/Operational Diligence
  • 42:30  Current Healthcare M&A Trends

The Power of Financial Preparation

 
The healthcare mergers and acquisitions (M&A) landscape is complex, with each transaction carrying unique challenges and opportunities. This episode delves into the critical role that financial preparation plays in the success of these deals. CohnReznick’s Aaron Cook and Jeff Michelson explain how their firm supports healthcare clients through meticulous quality of earnings (QofE) analysis, a process that scrutinizes a company’s financials to ensure they are presented in the most favorable and accurate light.

One of the key takeaways from this discussion is the importance of early preparation. The guests emphasize that companies should begin thinking about their financial health well before they plan to go to market. This proactive approach not only shortens the transaction timeline but also increases confidence among potential buyers, who are more likely to engage with a company that has thoroughly vetted its financials.

As the conversation progresses, Cook and Michelson discuss the evolution of the QofE process, noting that today’s market demands a more detailed and nuanced approach. This includes analyzing provider contracts, reimbursement rates, and other factors that might not have been as critical in the past. They also touch on the importance of understanding a company’s operational metrics and how these factors can impact the perceived value of a business during a transaction.

The episode concludes with a discussion on current market trends. While the M&A market has slowed due to economic conditions, there is still significant activity, especially for quality assets in the healthcare sector. Buyers are more cautious, but they are willing to pay for well-prepared businesses that can demonstrate strong financials and clear growth potential.

 

Episode 10 Resources