Positioning Your Company for a Future Transaction

Part One: William Seibels

Attracting investors requires your company to have an investable story, and as William Seibels, former CFO of Change Healthcare Corporation, shares in the first of this three-part blog series, aspirations alone won’t get you the backing you need. So what can you do to position your company for a future transaction (and a successful one at that)? Keep reading my friend, and then ask Inflammo how we can help propel your business to a new height.

William Seibels has been the CFO of Change Healthcare since 2012 and, after the acquisition by Emdeon in November 2014, has also been responsible for finance for Emdeon’s Software & Analytics business segment.  Prior to Change Healthcare, he worked in a variety of operating and finance roles for various companies, many of them in the healthcare space, and started his career in investment banking, often working with early stage companies to raise capital or in selling their business.  In 2015, Emdeon adopted the name Change Healthcare as part of its rebranding, although we refer to each entity in the interview below by their name at the time of the transaction.

On November 19, 2014, Emdeon announced it had entered into a definitive agreement to acquire Change Healthcare. Tell us about the role you and your team played throughout that transaction.

Our company, Change Healthcare, went through two transactions during my tenure as CFO.  The first was a capital raise from a syndicate of national healthcare venture firms; the second was the sale of the company to Emdeon, a leading provider of software and analytics, network solutions and technology-enabled services that optimize communications, payments and actionable insights by leveraging its intelligent healthcare platform.  My team was involved in pretty much every critical aspect of the process for both transactions.  If there was a data room request, we were either involved in analyzing and collecting the information, or taking information compiled by others and structuring in a consistent fashion.  At the end of the day, we were responsible for ensuring information was presented in a cohesive fashion to support our investable story.  While a lot of this was financial in nature, there was also a large amount of non-financial information that the finance team was ultimately responsible for, running the gamut from operating metrics to client satisfaction surveys to HR practices to sales performance metrics.

Knowing your professional background, I imagine you were able to anticipate the line of questioning and diligence efforts you would ultimately be facing when entering a transaction event. Was there anything you and the management team were intentional about or focused specifically on during your early days at Change to best position the company for a future transaction?

We were a fairly small company with big aspirations.  Knowing that investors are not going to back a company based on aspirations alone, we were very deliberate in breaking down the story into a series of key strategic goals and building out proof points to support these goals.  For example, one of our key goals was demonstrating a viable upsell strategy, where we could build a relationship with a client from a starting point of product A to ultimately Products A through D.  We focused a lot of effort on building these upsell proof points, and used this to demonstrate a highly compelling revenue story simply from broadening our relationships in our existing book.  So instead of having to penetrate a certain percentage of a large, unproven market, we were able to show an opportunity for success in a much less risky fashion through existing relationships.  This also helped prospective investors from a diligence standpoint as they could hear directly from clients why they had either purchased our broader suite of solutions or were considering doing so, which provides more information and comfort in their diligence process than talking to prospects who have not yet made a purchase decision.

Further, our executive team had all been involved in this process before, either as a buyer, seller or advisor, so we could anticipate a lot of the information that acquirers would be looking for.  With this knowledge, we were able to build in necessary processes to how we managed the business that ultimately served us well when we reached the point of selling the company.  For example, we knew which terms in customer contracts were beneficial in a sales process and were therefore less flexible in negotiating those; we knew to have all employees sign IP ownership and confidentiality language upon hire; and other things of that nature.  This allowed us to effectively do the work of being prepared to sell the company as we actually grew the business, avoiding a scramble to try to put together infrastructure late in the game that was necessary to sell the company.

There are certainly other business owners who are considering some sort of liquidity event – be it a capital raise or sale of the company – in 2016. What keys to success or advice would you give them today in helping them ultimately prepare for a successful event?

If I had to distill down to three keys to success, I’d probably go with 1) don’t go to market until you are well-equipped with the proof points for your story, 2) invest the money to have a high quality legal firm build out your contract templates and help you decide when to agree to material modifications to those templates, and 3) have a rock solid organization system built as you run the business to ensure you have ready access to critical information without meaningful gaps.

Lastly, start preparing now, as opposed to when you are ready to actually launch a process.  It is always easier to build the infrastructure as you grow versus in the span of an incredibly short and busy timeframe when selling the business.  Seek out a copy of a standard diligence checklist that is germane to your industry, compare how well prepared you are to answer the questions on the checklist, and methodically close the gaps as you continue to build your company.

About Inflammo

Inflammo is a team of finance professionals providing the full suite of outsourced financial services, from outsourced CFOs and one-time consulting projects to day-to-day accounting work, to help growing enterprises implement and manage the people, processes and systems that define a successful finance foundation.

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