Sale of Health Care Cost Containment Company Exceeds Expectations


About the Company:
ABC Corporation was a health care cost containment company operating under XYZ Holdings with publicly traded debt instruments. When XYZ was taken over by the SEC for securities violations, ABC became an operating company under a receivership. When we became involved with ABC, the company had a stalking horse bidder for the assets of ABC and was actively negotiating an asset purchase agreement at $3.2MM. ABC had received two valuations from valuation/investment banking firms that set the value of the company around this level. We won the engagement to represent ABC.

We were hired to identify over-bidders for the assets of the company and bring them to the table for the auction process. Other than our monthly fee, our compensation was based on a relatively high percentage of any upside we were able to generate. In this situation, the dynamic of working with the Receiver and management was further complicated by the necessity of complying with the constraints and mandates of the Federal Court. Achieving a successful outcome was further challenged by a financial restatement and reduction in forecast midway through the process.

The traditional business model for health care cost containment companies is the negotiation of inflated out-of-network hospital bills in excess of the Medicare, HMO, or PPO rates. What we discovered through our engagement with ABC’s management was that they had developed a unique technology solution that transformed the traditional business model dramatically – establishing a different standard for health care economics on behalf of self-insured employers. One of the key elements for our success was our ability to translate internal “company/industry speak” into language that clarified the business opportunity.

A strong bond of trust was developed with the President of ABC, John. As John put it, “I can’t spin you, because if you spin my spin, our information will not be credible.” This was very important as we worked through the revised forecast, customer by customer.

We were then able to speak knowledgeably with every buyer about the details of every client – to tell the company’s real story and have it substantiated by the facts.
Additionally, a thorough review of the proposed asset purchase agreement resulted in substantial re-writes of important provisions, improving the form of payment, the timing of payment, and the certainty of close – all of which were in doubt, based on the original document format.

The company sold for $7.05MM with an all-cash, fifteen-day close – exceeding valuation expectations by over $3.8MM.

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John, ABC Corporation