| You have made the decision to sell your | | | | Given this, the time critical nature of your |
| healthcare information technology company. | | | | pending business sale, and your desire to |
| Maybe it was because your prospects are | | | | ring the bell from your 30 hospital chain |
| selecting the inferior product but superior | | | | deal, what do you do? |
| safety of your brand name competitor. It | | | | |
| could be that one of the industry giants | | | | You engage a great M&A firm that specializes |
| recently acquired one of your small but | | | | in Healthcare Information Technology |
| worthy competitors and has removed the risk | | | | companies (I know of one if you are |
| component of a buyer's decision. You may | | | | interested) to sell your business. Let them |
| think that you have a limited window of | | | | focus on selling your business and you focus |
| opportunity for your technology and you | | | | on running your business and closing that big |
| should sell it while it still enjoys a | | | | sale. Get several buyers interested and |
| competitive advantage. | | | | negotiate for your best deal. There will be a |
| | | | lot of give and take here. At the right |
| These are all good reasons to set your | | | | moment, as a counter to one of the buyer's |
| business sale process in motion. A critical | | | | points, you ask for a 6-month window post |
| element here is time. Good technology not | | | | acquisition to close that deal. You then ask, |
| achieving meaningful market penetration is | | | | for example, for an earn out incentive of 50% |
| vulnerable to competition. Given this | | | | of the contracted first year revenues of the |
| scenario, the more rapidly you can get your | | | | hospital deal as "additional transaction |
| acquisition opportunity in front of the | | | | value" payable 30 days after the one year |
| viable buyers, the better your chance for | | | | purchase anniversary date. |
| more favorable sale terms and conditions. | | | | |
| | | | There are lots of moving parts here so let me |
| All systems go, right? But wait. We have a | | | | elaborate. The first element is you do not |
| major proposal out to that 30 hospital chain | | | | delay your business sale process. We already |
| and when we get that deal our sale price will | | | | established that it was time critical. |
| sky rocket. So we are just going to wait for | | | | Secondly, I very carefully chose the language |
| that deal to close and then put our company | | | | "additional transaction value". We want to |
| up for sale. | | | | make sure that this payment is not confused |
| | | | with ordinary income at double the long term |
| Let me give you a gem here. We will call it | | | | capital gains tax rate. Third, you have a way |
| the Moving Sales Pipeline Theorem. It states | | | | better chance of closing the big hospital |
| the sales pipeline always moves to the right. | | | | chain as a division of G. E. Healthcare, for |
| This is based on over 20 years in technology | | | | example, than as XYZ Diagnostic Software, |
| sales and sales management experience and | | | | Inc. Finally, what a great way to kick off a |
| many years of selling companies with sales | | | | relationship than a big collaborative sales |
| pipelines. The sales either take much longer | | | | win that makes the buyer look really smart. |
| than projected or do not materialize at all. | | | | Your earn out check will be the most |
| | | | enjoyable payment they can make. |