How to Position Your CRNA Practice For A Buyout

Since 2013, anesthesia practices are selling to corporate buyers or merging with other groups at unprecedented rates. In 2014 alone, there were 27 acquisitions completed by 14 separate buyers, including multi-billion dollar publicly traded companies and private equity-backed anesthesiology practice consolidators1.

Buyouts can allow CRNA business owners to reduce their overall financial risk, take cash from their business, and potentially continue to work within their practice. But before considering selling your practice, it’s important to take steps to position your firm to maximize the value you will receive from a buyout.

In the simplest of terms, a buyout means a CRNA practice owner is allowing an investor to take ownership of their practice in exchange for cash. A buyout may be an appropriate solution if you aim to mitigate your business owner responsibilities or align your practice with a stronger, larger, and more secure business.

There are several reasons why a CRNA may want someone to buyout their practice, including:

• Monetizing the value of their practice when buyer interest is high

• Reducing their overall financial risk by withdrawing assets from their practice

• Better protecting their current income

• Improved work and life balance

• Gaining more security in the market by merging with a larger or more stable group practice or company

• Accessing more patients, facilities, services, technology, administrative expertise, and other elements of infrastructure

• Acquiring better payer contracts

With a buyout, you can negotiate price and compensation, which means you have the chance to make a significant profit if your practice offers a unique value to the buyer and fits within their growth strategy. Based on the terms, you may be able to negotiate to stay on payroll as a part-time or full-time CRNA.

A buyout can be a very lucrative opportunity — if you properly position your practice. If you don’t, you may receive less compensation than your practice is worth, the transition could be rocky, or you lose all decision-making power and must settle for an income, schedule, or management style you’re not comfortable with.

POSITIONING YOUR FIRM FOR A BUYOUT

Before you begin courting potential buyers, you should properly position your CRNA practice for a buyout. The first step is to understand the value of your practice. Buyouts are typically measured using three components:

1. Hard assets (medical equipment, office equipment, leasehold components, etc.)

2. Accounts receivable

3. Goodwill

Goodwill has the most variation, but can also be the most valuable. Generally speaking, goodwill is the going concern value or the worth of running your practice, from the patient return rates to referral patterns to past performance to anticipated future business. The name of the practice or CRNA can also improve a practice’s goodwill if you or your practice is well-known in the medical community.

TAKE CARE OF FINANCIAL HOUSEKEEPING

Your practice will be better positioned for a buyout if it is financially healthy. Before looking for a potential buyer, you’ll want to get your finances in order and sort out any financial issues. The first step is to speak with a financial advisor and accountant about your current position and improvement opportunities. A financial or tax professional may recommend improving your financial position and cash flow by recovering or consolidating outstanding debt, reducing or rearranging expenses, or searching for a government grant for research or innovation.

ASSEMBLE A DEAL TEAM

Completing a buyout isn’t a simple process, but with experienced professionals on your team, the process can go more smoothly. Build a team that includes a financial advisor, attorney, accountant, and any key management members of your practice.

CONSIDER AN AUDIT

No CRNA practice is perfect. Even the smallest of problems can impact an offer or sale. To make sure you’re aware of any potential problems, consider getting an audit. While this can be timely and expensive, the correction of any problems will be much less disruptive now than during the process of a buyout.

DETERMINE THE TYPE OF BUYER YOU WANT

Before considering buyers, think about which type of buyer you would prefer to take over your practice. There are two main types of buyers of CRNA practices — financial and strategic.

A financial buyer is usually a private equity firm or other type of investor that wants to get into the anesthesiology field. Often, price is the bottom line for these buyers, but they may be more open to allowing you, the owner, to retain an equity interest. You may receive a lower offer upfront, but you could share in the continued value growth of your practice.

A strategic buyer is usually a healthcare provider or individual or company already within the anesthesiology field that wants to increase their service offerings. As they are within the industry, they are often more willing to pay a higher price that aligns with the value of your practice.

PREPARE FOR DUE DILIGENCE

Any potential buyer will require extensive due diligence regarding multiple areas of your practice, including ownership, financial statements, tax compliance and other legal issues, billing and coding compliance, operations, employees and associates, payer contracts, and customer and referral relationships. To help this process run smoother, make sure all practice information and documents are organized and accessible.

After building your practice for so many years, you want to make sure you get the best possible offer for your business. By having an in-depth understanding of the buyout process and any potential hurdles, you can be better prepared for a successful and lucrative sale.

Before getting started, consult with a CERTIFIED FINANCIAL PLANNER™ practitioner who specializes in serving the unique needs and circumstances of CRNA business owners. A CFP® professional can offer guidance on positioning your practice for a buyout and answer any financial questions or concerns you have.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

1Haverford Healthcare Advisors, January 2015 http://www.haverfordhealthcare.com/wp-content/uploads/2012/01/Anesthesiology-Practice-Acquisitions-January-20151.pdf.

About Jeremy Stanley

Jeremy Stanley is the founder of CRNA Financial Planning®. He has been providing advice and guidance for Certified Registered Nurse Anesthetists (CRNA) for over two decades. As a CERTIFIED FINANCIAL PLANNER™, Jeremy has met rigorous certification and professional standards set by the CFP Board. He is committed to adhering to the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence when dealing with clients. Jeremy is also the author of the book “The Wealthy CRNA,” which lays out a foundational roadmap for CRNAs to help them plan their financial future.  

Jeremy Stanley is a financial professional with and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and CRNA Financial Planning® are separate entities from LPL Financial.