I Want to Sell my Healthcare Information Technology Company, Just After This Next Big Sale by David M. Kauppi, CBI, President Mid Market Capital (click here for PDF)

You have made the decision to sell your healthcare information technology company. Maybe it was because your prospects are selecting the inferior product but superior safety of your brand name competitor. It could be that one of the industry giants recently acquired one of your small but worthy competitors and has removed the risk component of a buyer's decision. You may think that you have a limited window of opportunity for your technology and you should sell it while it still enjoys a competitive advantage.

These are all good reasons to set your business sale process in motion. A critical element here is time. Good technology not achieving meaningful market penetration is vulnerable to competition. Given this scenario, the more rapidly you can get your acquisition opportunity in front of the viable buyers, the better your chance for more favorable sale terms and conditions.

All systems go, right? But wait. We have a major proposal out to that 30 hospital chain and when we get that deal our sale price will sky rocket. So we are just going to wait for that deal to close and then put our company up for sale.

Let me give you a gem here. We will call it the Moving Sales Pipeline Theorem. It states the sales pipeline always moves to the right. This is based on over 20 years in technology sales and sales management experience and many years of selling companies with sales pipelines. The sales either take much longer than projected or do not materialize at all.

Given this, the time critical nature of your pending business sale, and your desire to ring the bell from your 30 hospital chain deal, what do you do?

You engage a great M&A firm that specializes in Healthcare Information Technology companies (I know of one if you are interested) to sell your business. Let them focus on selling your business and you focus on running your business and closing that big sale. Get several buyers interested and negotiate for your best deal. There will be a lot of give and take here. At the right moment, as a counter to one of the buyer's points, you ask for a 6-month window post acquisition to close that deal. You then ask, for example, for an earn out incentive of 50% of the contracted first year revenues of the hospital deal as “additional transaction value” payable 30 days after the one year purchase anniversary date.

Dave Kauppi is the president of Mid Market Capital, Inc. MMC is a private investment banking and business broker firm specializing in providing corporate finance and intermediary services to entrepreneurs and middle market corporate clients in high tech, healthcare, and a variety of industries. Dave began his high tech Mergers and Acquisitions practice after a twenty-year career within the information technology industry. His varied background includes positions in hardware (Storage Technology Corporation), IT Services (IBM's Service Bureau Corp. and Comdisco Disaster Recovery), Software (Metaphor Computer Systems), computer leasing (Bell Atlantic Systems Leasing), datacom (Paradyne Corp.), and Internet (DigitalCars.com). The firm counsels clients in the areas of mergers, acquisitions and divestitures, succession planning, valuations, corporate growth and turnarounds. Dave is a Certified Business Intermediary (CBI), a licensed business broker, and a member of IBBA (International Business Brokers Association) and the MBBI (Midwest Business Brokers and Intermediaries). For more information or a free consultation please contact Dave Kauppi at (630) 325-0123, email davekauppi@midmarkcap.com or visit our Web page www.midmarkcap.com.