Case Study: Sale of a Healthcare Technology Company

Case Study: Sale of a Healthcare Technology Company

At the Austin Dale Group, we work with owners of privately-held technology businesses to realize optimal value for their businesses.  Entrepreneurs often ask us how the process of selling a business works and what they need to do to make sure their company is in the best position when they get ready to sell.

To give entrepreneurs a real-world perspective we have documented this recent example of selling a healthcare technology company.

Company Background

ProviderSoft develops and markets software which is used to manage agencies involved with behavioral services for children. ProviderSoft was founded by Mark Shaw and Chris Miles, utilizing software developed by Miles Technologies to support the Early Intervention Agency run by Mark Shaw.

When Mark Shaw sold his Early Intervention agency, he retained exclusive rights to the software system and set out to commercialize it and sell it to owners of other behavioral service agencies.  Over a 12-year period, Mark grew the company, adding customers and employees and supporting an increasing number of agencies and the families they serve.

Owner’s Objectives

Having grown ProviderSoft to a certain size and built a management team capable of running the company independently, Mark thought the company needed to join with a larger organization, with the resources to serve a much broader market.

After talking with several M&A advisory firms, Mark selected the Austin Dale Group to help him sell his company.  He chose ADG because of our understanding of both technology and healthcare, and our experience conducting transactions of this type.

Preparing the Company to Go to Market

The first step is a comprehensive review of the business.  ADG looks at all aspects to identify strengths, weaknesses, and issues that could derail a deal.

ProviderSoft had been managed in an exemplary manner.  Mark Shaw had successfully sold his prior business and applied that experience to preparing ProviderSoft for eventual sale.  The company was not dependent on the owners.  Financial reporting was done in accordance with generally accepted accounting practices (GAAP). Systems and processes were well organized and documented.  Contracts with customers were well conceived and appropriately executed.

Marketing the Company

From our extensive experience in the healthcare market, Austin Dale Group compiled a list of several hundred potential buyers for ProviderSoft.  This list also incorporated contacts that had previously reached out to ProviderSoft regarding a potential sale.

With the blessing of Mark Shaw, we contacted prospective buyers about the opportunity and provided a Teaser document to spur interest.  We also posted the opportunity on specialized websites catering to financial and strategic buyers.

We found a significant amount of interest for multiple reasons.  Healthcare is a hot M&A segment and ProviderSoft is the leader in its sector of the market.  Numerous prospective buyers executed NDAs and reviewed the information we had compiled in the Confidential Information Memorandum (CIM).

Managing Competitive Offers

Our sales process resulted in a competitive interest in the company from multiple buyers. We met with many interested parties, including private equity, strategic acquirers, and high-net worth individuals.  Given the level of interest, we were able to pare down the list to the best buyers.

Initially, Mark accepted the strongest offer.  Both parties signed a letter of intent (LOI) and proceeded with the due diligence process.  However, we found that the process was taking much longer than originally estimated by the prospective buyer.  We came to learn that the prospective buyer was having internal conflict over the deal and they ultimately stopped the process due to a dispute over where ProviderSoft would fit in the prospective acquirer’s organization.

Having had such experience on past deals, ADG maintained connection with a solid backup offer and were able to negotiate a second LOI once the first LOI was terminated.  We signed the LOI with Jonas Software, a large and growing Canadian company that owns over 80 software companies.

Managing Due Diligence

The Due Diligence process can be tedious and time consuming for all parties.  It can also be a relatively fast process if both the buyer and seller are well prepared.  In this case, the seller was very well prepared, in no small part due to Mark’s prior deal experience.  Jonas Software has done many transactions and has a very efficient acquisition process, so we were able to work through the due diligence and closing process in less than 60 days.

There were no surprises in the due diligence process and ProviderSoft’s team answered all the buyer questions quickly and to their satisfaction.

Negotiating the Definitive Agreement

The definitive sale agreement is generally negotiated in parallel with Due Diligence.  In this case, most of the key terms were discussed up front with Jonas when the LOI was negotiated, so there were no major surprises with the definitive agreement.

As with any major contract, attorneys are involved to negotiate the language of the transaction.  Some terms required multiple rounds of negotiation, but both sides negotiated openly and honestly and completed the process feeling that they had achieved a fair agreement.

Closing the Transaction

Closing a transaction is all about timing and coordination. Legal, financial, communications, and human resources all must be synchronized to affect the transfer of ownership.

While every transaction is different, there is usually some type of last-minute complication that injects a bit of stress and causes all parties to sigh with relief when the transaction is closed.  With ProviderSoft, closing was surprisingly easy.  Jonas Software met all their commitments and negotiated fairly.  The transaction closed a week earlier than planned, and all parties walked away smiling.

Key Take-Aways for the Entrepreneur

  • Selling a company can be a lengthy and complex process with numerous potential pitfalls. Engaging competent, experienced advisors can help to avoid pitfalls.
  • Selling a technology business requires more specialized skills and experience than selling a regular, “Main Street” business. Understanding the business by the advisors is often crucial, as buyers are larger, sophisticated national or international entities.
  • Adherence to GAAP financial reporting standards will reduce transaction costs and speed up the deal process.
  • In the due diligence process, be prepared for an intense period of activity with high demands requiring research into your business records and preparing specialized reports. Avoid scheduling vacations or other time-consuming parallel activities during this period.
  • When negotiating contracts with customers, vendors or partners, particularly long-term renewable contracts, keep in mind that you might want to eventually sell the company. Make sure that those agreements have change of control provisions and give a potential acquirer enough flexibility to address changing circumstances.
  • During the process of selling your company you should continue to make day-to-day business decisions as if you will continue to “own the business forever”.


About Austin Dale Group

Austin Dale Group is an M&A advisory firm in Austin, TX, and our clients include software companies, cloud solution providers, and IT managed service providers – as well as healthcare and other tech-enabled businesses.

We specialize in M&A and strategic growth advisory services for lower middle-market technology businesses with revenues up to $75 million. We help our clients prepare for a merger or acquisition, build shareholder value, and sell their business (or divest a division). We also work with companies that wish to acquire other companies as part of their growth strategy.

Get in touch with us and learn firsthand how our experience and resources will help your merger and acquisition processes go smoothly at any company size.