A four-site specialty group received an unsolicited letter of intent from a private-equity sponsor. The offer looked strong. The physician-owners had sixty days, no transaction experience among them, and an advisor on the buy side who was very good at their job.
The multiple was reasonable. The structure was not. A meaningful share of the headline number sat in rollover equity and an earnout tied to metrics the group would not control after close. Separately, the group’s own numbers understated its performance: two sites carried unbilled ancillary revenue, and the coding mix was conservative enough to depress EBITDA materially.
We cleaned up the financials before responding, which moved the baseline the offer was priced against. We modeled the earnout under three realistic post-close scenarios so the owners could see what they were actually being offered. Then we sat on their side of the table through renegotiation and diligence.
Effective value gained versus the initial LOI
Earnout period, renegotiated
Sites, all retained
The group closed at a higher effective value with a materially shorter earnout and governance protections that did not exist in the first draft. The physicians kept practicing. That was always the point.
Every Audit starts from the same place and ends somewhere different. That is rather the point of doing one.
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