Archive for category: General

Any entrepreneur who takes the leap into healthcare or health technology, especially with no prior experience in the industry, usually does so in response to a tragedy. That was the case for Aaron Leibtag and Steven Aviv when they created Pentavere Research Group, a digital healthcare company.

When Steve’s mother passed away unexpectedly due to a data error, the pair built AI-powered software that can identify patients who may not be receiving the care that they need due to the information being buried in a patient’s electronic health record.

Despite only having 15 employees at the time, the company received an acquisition offer for a whopping $15 million.

The Idea

Aaron has a background in finance and spent some time on the private equity side, evaluating consumer-facing companies to drive better results. As such, he has an appreciation for what happens when you combine great data with great people and great processes.

His co-founder, Steven Aviv also spent some time in finance but on the technical side, building large financial systems that ingest data. One day, his mother went into what should have been a routine procedure. Based on her comorbidities (coinciding diseases), she needed to be put on a certain medication. This information was missed by her care team because it was buried in a clinical note and she passed away as a result.

Both Aaron and Steve were at the point in their corporate careers where Steve in particular was helping companies make millions of dollars every day by analyzing data. When such a catastrophic event — that could have been prevented through analyzing data — happened to Steve’s mother, they started to do some research. They found that the majority of patients fall through the cracks in some way, shape, or form within healthcare.

While not every patient experiences such a catastrophic event, many don’t receive the proper treatments, medications, and interventions. So, Aaron and Steve decided to fill in that gap and build something to help.

They built an AI engine that can ingest and read clinical notes within an electronic health record that a doctor dictates to identify patients who are falling through the cracks in healthcare systems. In layman’s terms, they’re able to take all of that clinical text and turn it into a structured Excel spreadsheet-like data set that can be used to improve healthcare.

Once they had the product, they validated the technology by getting the outcomes published in high-impact peer-reviewed journals that matter in healthcare. Now, they were ready to bring it to the market.

The Business Model

Aaron and Steve didn’t know what the business model for their product would be. They simply knew that the industry was large, and the problem was great.

Unlike other digital health companies — when they were growing it was the heyday of venture capital raising — they went to one of Toronto’s largest hospitals to really understand the problem.

They say that they got lucky and were approached by people on the medical side of pharmaceutical companies who themselves are trying to find real-world evidence to understand how their medications were working. The companies were willing to fund the project so they would have access to the findings.

Six months later Aaron and Steve presented their results at the most prestigious lung cancer conference in the world in Barcelona. Soon, more pharmaceutical companies started to call asking them to do similar studies.

The money from those studies helped to fund their R&D and validate their AI engine, but say that at that point there still wasn’t a product or a business model. That said, it was a step in the right direction and both Aaron and Steve knew they had come up with something valuable — and needed in the industry.

The Acquisition

Aaron and Steve began to consider an acquisition when they had over 19 high-impact peer-reviewed publications validating their engine — a claim that not even companies like Google have.

It hit home for them when they got a call that they were nominated for a Prix Galien, the equivalent of the Nobel Prize in the life science industry. They were also told that there was only a very short list of other AI companies with the same criteria as theirs. So, Aaron and Steve decided that this was the time to commercialize and scale.

To do so, they didn’t just need capital, they also needed access to data. The right partners with the right mindset were the missing pieces to the puzzle. It wasn’t so much about an exit, it was trying to find a like-minded partner.

When they tried the venture capitalist route, all it brought them was capital but no data. What’s more, they didn’t really like the idea of giving up control of the company, no matter how much money someone was willing to put down. They wanted — and needed — to partner with someone with the same goals, mission, and values (to improve healthcare) and they just didn’t find that with VCs.

That’s when they began talking to Healwell AI, a healthcare technology company also based in Canada. They were willing to open up their data ecosystem and give them the funding they needed. Healwell is also a publicly traded company and has a strategic alliance with WELL Health, the largest private provider of healthcare in Canada.

It was an easy yes.

Key Lessons

• Uninspired? Identify market gaps. Aaron and Steve recognized a significant gap in healthcare where patients were not receiving proper treatment. This realization led them to develop a solution that could identify and address these gaps. If you want to build a business but aren’t sure where to start, pick an industry and figure out what it’s missing.
• Create, tweak, validate. Before bringing their product to market, Aaron and Steve validated their technology by getting outcomes published in high-impact peer-reviewed journals. Yes, they were required to due to the nature of their product and the industry, but there’s something to be learned here. Come up with your own system of validation to determine whether your idea is viable, and then be willing to tweak it if needed.
• Seek strategic partnerships. Aaron and Steve first went to VCs but quickly discovered they wouldn’t likely find their ideal partner there. Rather than giving up, they sought out companies that had the same mission, values, and goals as they did. Their patience and due diligence paid off.

Although it operates under the Healwell umbrella, 48% of the company still belongs to Aaron, Steve, and the other original shareholders. The final Letter of Intent was signed on September 22, they announced the definitive documents signed to the public markets on November 15, and closed the transaction on December 1, all for a cool $15 million.

Aaron and Steve are still very much involved in the day-to-day operations post-acquisition, and Healwell’s stock went up 30%. It’s safe to say everyone made it out a winner.

If you’re ready to take your business to the next level and aren’t sure whether an exit or an acquisition is your best bet, we can help. Give us a call today to talk about your options.

Virtue is a key part of living a useful and rewarding life. Not only are there many virtues any of us can work to obtain, there are levels of those virtues that allow us to always keep pushing and improving over the whole of our lives. Just as some virtues, for example, patience, are particularly important for parents, so too are others for business brokers. In this article we are going to highlight four in particular (though brokers need more than these four to close most deals!).

Fortitude

A broker has to have the ability to keep going. On the podcast we recently noted that a transaction could have as many as 500 points of contact for a broker, whether that point of contact is a 90 second response to an email or a 90 minute phone call to calm nerves. The broker isn’t just responsible for keeping himself going all the way through a transaction, he needs to keep his client and the counterparty in the game too. 

This fortitude is often expressed in a calm resolve that doesn’t lead to panic at obstacles, but rather focuses on solutions.

Justice

A broker isn’t interested in everyone feeling completely happy walking away from a transaction, because it’s often impossible to get everyone everything he/she wanted. But a broker should be interested in having everyone walk away from a transaction feeling that they were treated fairly and equitably throughout the process.

A broker doesn’t want to hide anything from a counterparty or aid his client in hiding anything. A just broker takes pride in leaving a legacy of integrity through every transaction.

Prudence

Prudence keeps a broker and his clients on an even keel. It means not overreacting to adverse news, not panicking when a large obstacle suddenly appears, not allowing ultimatums to be sent in emotional moments.

Prudence also discourages unnecessary intermediaries or “experts” who can just as often destroy and blow up a transaction while they are claiming to be the one necessary part of it. Brokers try to be the neutral party in the room, offering context and advice, but not urging decisions one way or the other.

Hope

It may sound a bit cheesy, but all the best brokers have a solid supply of hope in their lockers. This isn’t about fake cheerleading or fake smiles, but about keeping a positive mindset and attitude, with a “let’s move forward” tendency. 

Interestingly, hope is contagious, so a hopeful broker often shares that with his client and even the counterparty: “we are going to get to the finish line together.”

While we are proud of the experience in our office, we’re also proud of the mosaic of virtues we hold as a team that make us better brokers and better servants for our clients. If you’re looking for brokers with these virtues, give us a call.

Of course here at Apex Business Advisors we are business brokers. We go to the business broker conferences, we have the business broker credentials, and we probably have some business broker t-shirts or mugs lying around here somewhere. But if you’re looking to buy or sell a business, a broker is the minimum you need. What you really want is a business advisor. Let’s talk about what that means.

What a Business Broker Does

At a basic level a broker is defined as someone who collects information from you so that he/she can list your business. But as we’ve spoken about in so many articles, that’s only one part of the beginning of the process.

What a Business Advisor Does

As we mentioned in our “day in the life” article, business advisors very rarely have a typical day. We are often working on different batches of activities for our clients. They can fall into a few different categories. Let’s discuss a few.

Information Analysis

It’s one thing to collect information from a buyer or seller, it’s another thing to understand what that information means, especially if a client is in an unusual business category. An advisor is going to look at all that information, make notes, and come back with questions. Some of those might be:

• Why there are certain trends in the books (good and bad)
• Where are tax documents (if any are missing/never filed)
• What the legal status is of the company and how is the ownership distributed
• What’s the status of payables and receivables
• If there is paperwork substantiating any important decisions in recent years

Sale Prep

A business advisor has to get a business ready to go to market, and very rarely do business owners come into our office and plunk a business down that’s immediately ready to sell (though we would LOVE that). An advisor is going to look closely at:

• Does the valuation make sense for the business and the marketplace?
• What is the situation with key employees and employee turnover in general?

He/she will also look at current SDE and how to improve profitability and curb appeal of the business by ensuring there are manuals and systems in place.

Another part of sale prep that a business advisor is always doing is cultivating an engaged and serious pool of buyers and sellers so that when the right opportunities come along, making the connection happens quickly. Here in the office we’ve often seen advisors with great lists get genuine offers within hours of learning about a new opportunity via an email blast.

Confidentiality and Negotiation

Most business owners do not come into the process with multiple transaction experiences nor do they necessarily go on to have more after working with us. Very often a business sale is the largest business transaction of their lives, and despite those high stakes, clients can fail to trust the professionals who deal with it every day, multiple times a day. Two big client failures (when they happen) are in confidentiality and negotiation.

Business owners don’t realize that confidentiality is key in transactions, not just customer-facing confidentiality, but internal, employee-focused confidentiality. Deals have disintegrated in front of everyone’s eyes because this wasn’t respected.

Negotiation is particularly important because a business advisor has no emotional attachment to a business that will lead to him/her acting irrationally in a negotiating situation. Not only does this objectivity help in the actual negotiations, it helps before that even starts, as advisors help craft a negotiation strategy based on valuation, the client’s needs and wants, the realities of the marketplace, and the thinking and attitudes of the counterparty.

Business advisors also have experience, not just their own, but also those of their peers that they can consult who have been in similar situations and can then crowdsource that wisdom to the client’s benefits. No matter how well connected or networked a client is, he/she won’t have that specific and targeted (often even industry-specific) experience at his beck and call.

The bottom line? A broker might help you sell a business, but an advisor is going to help you do it for the best price and help manage expectation and the experience along the way.

We’re Apex Business Advisors for a reason. We’d love to offer that advice to you. Give us a shout!

We’ve done a series of articles on general business questions that buyers will ask about the health of the business.  In Part 1, we asked, among other things, Why Sell?  In Part 2 we asked more granular questions, like the demographics of core customers.  In Part 3 we lead with a look back, asking what the seller would do differently with the knowledge he/she has now.

In this article we will look at questions that a buyer will consider when looking at the price you are listing the business for.  The answers to those questions will determine if he/she is willing to pay what you’re asking.

Capital Investment

What rate of return do I want?  Businesses, ultimately, are investments.  They probably don’t feel like investments the way that a stock portfolio or a 401k can, but they are.  In fact, they are often the most important investments of your life, in part because they offer a chance for outsized returns.  

A Main Street business buyer doesn’t normally have hedge fund expectations.  But that same buyer expects much more than one can get in traditional investments, in part because running a small business is significantly more risky than holding an index fund ETF.  Some might want a rate of return as low as 10%, some might not be willing to take the plunge for less than 20%.

Action item for seller’s diligence: Can I show a consistent rate of return on my own invested capital, or can I provide an estimate based on someone meeting my selling price?

How quickly do I want to repay my acquisition costs?  Buyers may have liquidated financial vehicles, borrowed from family and friends, or simply used their own savings if they don’t take out an SBA loan.  The buyer will need to calculate how long it will take them to pay back that outlay in relation to your asking price.

Action item for seller’s diligence: Have standard, accelerated, and best-case scenarios for repayment of acquisition costs based on your current cash flows, less any liabilities that the incoming buyer will not have.

Growth

How steady are sales and margins?  Here projections for new products and services will not be as useful as they are, at best, good estimates.  A buyer is going to look at your history over years.  Just as our buyers in the early teens used to look at how a business weathered 2008 and 2009, you better believe they will be paying attention to your 2020 and early 2021 numbers to see how your business weathered an unexpected global event.

Action item for seller’s diligence: Have your sales and margins charted year by year.  This is also a great internal auditing tool to share with your team to see if those numbers can’t be made better.

What are the biggest risks?  We’ve actually asked this question in other ways in our Questions for Buyers series, but this is more focused on financial risks.  For example, a buyer might consider the risk that a key employee will leave, but that may be less of an immediate financial risk than a key vendor going out of business.

Action item for seller’s diligence: Have some of the financial risks plotted out with your estimate of the likelihood it would happen, with the necessary consequences.

Sellers can sometimes get hung up on multiples and what they think they should get for their business and when you offer action items like we have above, they might resist doing them.  But what the most successful sellers know is that these are action items that not only telegraph the confidence a seller has in his/her or business, but pass that confidence on to the buyer as well.  This is why my number is my number is what the answers to these questions communicate.  The better your answer, the likelier a buyer will agree with your number.

Are you pondering what size business you can afford?  Or how much you want to sell your business for?  Our team can help you answer either of those questions.  Give us a call today!

Behind all our business broker listings, there is a business broker listing agreement. This spells out mutual responsibilities between us and our clients. As with any contract, this is something that deserves your undivided attention, as we’ve said many times before that a business transaction may be one of the most important events of your life. In this article we’ll discuss the various provisions of any given business broker listing agreement and what you should consider before signing one.

Why Have a Business Broker Listing Agreement?

The short answer? To protect you, your business, and your broker. Remember that ultimately, contracts are not there in case everything goes right, but in case even one thing goes wrong.

Key Elements of a Business Broker Listing Agreement

While every agreement may vary, these are the elements you must have for any serious agreement to list your business.

• Duration. This is the amount of time your business is listed for. As we’ve said in a previous article, selling a business can take between two months and two years.
  • Under twelve months: this is often pitched as offering more flexibility for the seller, but really, it puts undue pressure on a broker and as we’ll point out below, it may not really offer you the flexibility that it promises.
  • At least twelve months: this is pretty standard, as this recognizes that (and mentally prepares you for the fact that) this is a marathon, not a sprint.
  • Keep in mind that just because your engagement has passed doesn’t mean you won’t owe a commission to your broker. We keep records of everyone we introduce to a potential seller and if they conclude a transaction within a certain time period of the end of the engagement, a commission may still be owed. That’s why you need to be very clear on the details here, not just for your sake, but for your broker’s.
• Right to Sell. In this section you are going to give us the exclusive right to represent you in a business transaction. We’ve talked before about the sorts of things we do to market your business.
• Representation. Are you who you say you are? Do you actually own the assets you are purporting to sell?
• Protection/Indemnification Clause. Should anything go wrong during the transaction, this section addresses the legal and financial rights and obligations of all parties.
• Dispute Resolution Terms. Should significant problems arise during the transaction, how will these problems be cured? Will you use arbitration or litigation?  In which jurisdiction will the dispute be dealt with?
• Commission. This varies per broker and agency but here at Apex we settle this at closing.

We’re Here to Help

In a world in which we so often click past “terms and conditions” because we don’t want to bother to read them, it can be hard to sit down and work through a document like a business broker listing agreement. But you don’t have to do it alone! We’re here to help and are want you to be comfortable as you pursue a transaction. Give us a call today!