[EP 307] What Corporate Buyers Really Look for in Medical Practice Acquisitions – Part 2 with Kristin Carney

Introduction (00:00):
Ladies and gentlemen, are you ready? Okay, here we go. You’re listening to the Deal Room podcast. Join us as we bring you the inside scoop on business sales and acquisitions. Get across trends in the area and hear the industry’s best recount their real-life tips, traps and experiences. Now, here’s your host, Joanna Oakey.

Joanna Oakey (00:32):
It’s Joanna Oakey here and welcome back to the Deal Room podcast, a podcast proudly brought to you by our commercial legal practice, Aspect Legal.
Now in this episode, I’m continuing my conversation with Kristin Carney, founder of Piper Health, as we shift focus from preparing to sell to understanding what corporate buyers are really looking for when they acquire healthcare practices.
With more than four decades in healthcare and more than 200 successful transactions under her belt, Kristin shares a rare insider’s view of what matters most to large corporates and how doctors can find the right buyer fit for their people and their legacy.
Now in this episode, Kristin and I talk about the key factors corporate buyers assess when they are acquiring a medical practice, how to match your practice’s culture and values with the right buyer, and the common pitfalls to avoid when selling to a corporate.
So let’s jump in.

Joanna Oakey (01:35):
Okay, all right. Well, I’ve just got a couple of quick questions. I’m not sure which to start from. Actually, I wanted to go back to — we talked about what a corporation is looking for.
Can you share with us a bit of that criteria? Because this is the benefit of you sitting on the other side too, Kristin, right?

Kristin Carney (02:01):
Yeah, look, once upon a time when the corporatisation really kicked off, there were a lot of mistakes made. There was a lot of overpaying and there was a lot of “we’ll buy anything at a high price.”
And that burnt a lot of people, you know, on both sides — both vendors and buyers.
So now I guess they’re more sophisticated and, you know, we’re 20, 30 years down the track.

Kristin Carney (02:20):
In all honesty, most corporates are looking for the equivalent of around 10 full-time equivalent doctors, or the capacity to get there.
And that means also physical capacity as well as attractiveness to recruit.
They’re also looking for a good commitment from all the doctors within the practice. There’s no point in them paying a certain price only to have eight non-owner doctors leave within the first 12 months.
They’re looking for stability of staffing and practice management, and nursing in particular is very, very important to corporates.
Because one, the practice manager — if she’s good or he’s good and been there a long time — they can pretty much be the centre of the universe.
And if that practice manager’s not aligned to the sale or really quite negative about it, it can be very destructive to the transaction.

Kristin Carney (03:45):
So a good practice manager that’s willing to come on board and go on the journey with the corporation is also key.
I think things like registrar training — some corporations want that for the purpose of sustainability or growth strategies.
Potential for subtenants if they haven’t already got that, namely pathology, is always a good one. So if it’s not already there, the potential for it to be there is seen as quite attractive.

Kristin Carney (04:45):
Ideally, we’ve — you know, some people leave it a little bit too late to put their hand up to sell their practice.
I’ve had people call me who are sort of 65 and still running paper files. That is not attractive to a corporation.
Which is sad for them, but true. And you’d think it’s rare — it’s not as rare as you think.
So yeah — 10 FTE doctors, ability to get there, good management, stable staff, quality medicine, mixed billing I think for some corporations is key.
And good nursing to be able to access CDM and other nurse item numbers and nurse support within the practice.

Joanna Oakey (06:24):
And one last question. I think one of the biggest concerns for doctors who are looking to sell — but also in any other health-related space — is this concern about the buyer being a corporate.
Essentially looking for shareholder return versus the practice being run on the basis of patient outcomes.
I see this concern repeated again and again, not just in this space, but across dentistry, veterinary and other healthcare industries.
What is your perspective on this? Because I think it’s a really valid concern.

Kristin Carney (07:05):
It’s really valid. It’s really, really valid.
So when I’ve got a practice that is attractive to a corporate and that’s the path that the vendors decide to go down, I go through a process of explaining who the corporates are, where they’re at, what kind of culture they have.
Obviously, I don’t have all the information, but I have a reasonable amount.
And I’ve got clients who have sold into various corporates and they can tell you what it was like and provide great feedback.
I was at the GP conference for three days and it was incredible how willing doctors were to talk about the corporates they’d sold to and how it was going.

Kristin Carney (08:12):
So I like to run an expression-of-interest process for maybe six corporates.
But matching the culture is critical.
If you are really adverse to change and you can tell that the business does not want to enter the next 10 years being sold to one group, then another, then listed on the stock exchange — that works for some, but for others it’s just not on.
So it’s about knowing your market and saying, look, this organisation is about growth.
They’re going to pay you a good price. There’s minimal due diligence. The money will be in your bank.
But you are going to lose quite a bit of autonomy. Is that culture for you?

Kristin Carney (09:30):
Then you might look at another group that’s less about profit. Staff ratios are higher. There are more nurses. There’s no interference in how you practice.
But the price will be lower because they invest more in staff and nursing.
So you may have to take less if that’s what’s important to you.
So it’s really about knowing your business, knowing your buyers and being honest — not judgemental — and letting the vendor choose what works for them.

Kristin Carney (10:33):
If corporates are driven by profit and shareholders, it’s really obvious where they operate and how they operate. You can read it in the financial press.
It’s about being honest and letting the vendor decide what works for them.

Joanna Oakey (11:12):
This has just been such a fascinating discussion, Kristin. I could actually go on all day talking to you about all of this.
But look, if our listeners are thinking of embarking on the sale of a practice — any business — how do they find you?

Kristin Carney (11:36):
They can find me on my website, PiperHealth.com.au.
Strange business name, I know. My Scottish grandmother — I always get asked if I’m part of the clan. No, he was a lunatic.
LinkedIn, Facebook, website — and I’m starting to do a bit more of this kind of stuff too.

Joanna Oakey (12:05):
Love it. Well, Kristin, can I just say a huge thank you for coming on today to the Deal Room podcast. It has been an absolute pleasure.

Kristin Carney (12:18):
It’s been great. It was terrifying — but it was like a chat.