Services of Interest to Private Equity Firms, Part 1

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July 3, 2012

Services of Interest to Private Equity Firms, Pt. 1: Overview

Private equity firms without in-house specialists in the healthcare industry often turn to specialists who understand the environment, business drivers, and competition. Most private equity firms interested in healthcare have the ability to quickly understand the expense model of the business. What they need help with is understanding the income stream and volatility.

As financial specialists, we are particularly concerned with consistent generation of positive net income and cash flow for a consistent period of time with a stable or improving balance sheet. During this period of time we want to see the target organization meeting its financial obligations in a timely manner, and that the organization’s core services are relevant, competitive, and viable.

We know that private equity firms often get focused quickly on costs, AR management, and cash flow as practical matters that affect organizational change, but recognizing that what may be achievable in one setting may not in another. We have found that new owners often want:

  1. Rapid situational analysis
  2. Establish priorities
  3. Develop a plan of execution
  4. Obtain and maintain support & trust from stakeholders

We offer analytic skills with a focus on determining the real problems that exist. This allows the private equity firm to understand the business to be able to step in and improve cash flow, restructure debt, adjust staffing, and improve systems and controls rapidly. We also can assist in facilitating good, solid strategic planning for the new venture that is focused on executing to a desired future, as well as facilitating meetings, discussions, and retreats with the new venture.

As leadership experts we will boldly say that no technical skill is as important as leadership in implementing new relationships or in initiating a turnaround effort. Technical skills can always be purchased, but if you can’t successfully lead the effort, nothing else matters. Starting with good data is critical.