MAU 9 | Doing Business Transactions

 

You may not realize it, but doing multiple business transactions can actually help you in preparing and selling businesses. Jonathan Banta, the CEO of Preferred Dermatology Partners, talks with host Domenic Rinaldi about the lessons he learned from previous business transactions about the sale process, doing due diligence, and integration from the sale of his tech company. Jonathan also talks about staying on after the acquisition and the importance of earn-outs when creating a partner relationship. Tune in to this episode to learn how to streamline the process of collaborating different businesses and how to avoid buyer or seller’s remorse.

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Jonathan Banta: Lessons From Multiple Business Transactions

My guest, Jonathan Banta, fits squarely in the category of a serial entrepreneur. He has led several businesses through the sale and recapitalization process and he’s the CEO of Preferred Dermatology Partners in McKinney, Texas. I also count Jonathan as a longtime business associate and friend. We go back many years. Jonathan, can you believe that? This is unbelievable.

Time flies.

Jonathan successfully led two organizations through the business sale process and is navigating robust growth with Preferred Dermatology through a combination of organic efforts and strategic acquisitions. On the organic side, Jonathan and his team have continued to increase its service offerings to include things like dermatology, radiology, cosmetology, and a plethora of other services. From the research that I’ve done, I was paying meticulous attention to client experience and satisfaction. In addition, Jonathan is overseeing the growth of Preferred from three locations in 2012 to 2013, which makes them one of the largest practices in North Texas. It’s a lot of derma going on down in Texas with all that sunshine.

It’s inevitable that you will see a dermatologist if you live down here.

Prior to operating Preferred Dermatology, Jonathan was one of the founding partners of Concero Partners, a software integration company, which he built and sold to Tech Allies Solutions. We’ll be talking with Jonathan about his experiences in preparing and selling businesses, both Preferred and Concero. In his spare time, I understand that Jonathan is a BBQ pitmaster. Jonathan, I’m getting hungry thinking about it. I love that Southern barbecue.

You get baptized quick down here.

I’m happy to have you here. Let’s start with what’s your specialty on the barbecue.

The two big things are the brisket and the barbecue pulled pork.

I’m loving me some briskets. Do you have a secret to the brisket that you’d be willing to share?

Low and slow. It’s done when it’s done. Take your time. You have to have a good pit that retains heat. A couple of choices of wood, pecan or hickory. Post oak is a good one.

I bet nobody counted on getting that advice here. I’ll look forward to getting some next time I’m down there. Let’s start with the sale of Concero. That was the first business that you owned and operated a software integration company. It’s a deal that you sold to an industry insider Tech Allies. Tell me how that deal came about. Tell us a little bit about Concero and we’ll go through that deal in a little more detail.

Life after being in sprint together, you and I, after completing a Master’s program, I had written a business plan for a small company. I took a left turn into SAP, a software implementation integration company and the small firm out of Cincinnati. The founding partner ended up selling that company about 1 year and 18 months after I was there. That led to my move from Cleveland to Dallas. I stayed on in that acquisition with a group that was still based in Cleveland for about two years through an earn-out period and had to sit out for a year. After, I started Concero Partners from the ground up. It was SAP and we migrated into a lot of Microsoft .NET consulting with some flagship clients like Lockheed Martin, Fossil, CompUSA, and built that over about a ten-year run. We had a business partner involved in that, who was basically an Oracle DBA. Tech Allies was founded by the original founder of AF Kelly, which is who I went to a few years earlier. I circled all the way back around that group and bought our company, Concero Partners.

Did you take Concero out to the market in an auction process? Was this a deal that came together because the two companies knew each other and through some other discussions, it made sense to go down the acquisition path?

For anybody that's looking to sell or buy a practice or business, the key is to have the right partner. Click To Tweet

Yeah, it was certainly a relationship sale. It did not go to the market. We did not use any intermediary. There were certain synergies for both parties. They were looking to get into the Texas market, a lot of oil and gas on the SAP front. We had a good reputation with our clients locally and them being based in Cincinnati, the great lakes area, we were able to add value to each other’s companies. When you put the two together, it had a nice presentation.

Let me ask you, how did you get comfortable that you were getting fair market value without taking it out to the market?

We had been through this before. As you go through the M&A process, there’s a general financial model that a lot of the groups will follow and putting a value on a business. The crude math equation for a professional services company back then was roughly one times revenue. Generally, what you are fighting for in a scenario like that is how much of it is upfront and how much of it is earn-out.

How did you get informed around the one times revenue, economic and the payout of that?

We followed the blueprint from the sale that we had gone through several years earlier.

Integration, you bring in two companies together and it sounds like it was a nice fit, maybe somewhat accretive for Tech Allies. How did you get through integration? Were there bumps in the road?

It was seamless. We knew each other so there was a good cultural fit. There was a lot of initial synergies. We brought together different clients and talked about moving our clients here. We had some mobility applications that Tech Allies had already developed. We are integrating new products and services to existing clients and we were bringing a different .NET development platform to some of their existing SAP clients. It’s what I want to call cross-pollination or something of that nature, but the ability to cross-sell to functional services.

I’ve been involved in a bunch of transactions where two entities are coming together and they’re going to be able to take advantage of each other’s product offerings and cross-sell. Did that come to fruition at the end of the day?

Yes. I had already begun the process of managing the dermatology group. My ability to stay in the long-term is going to be limited either way. They had taken steps to get introductions to some key personnel of theirs that were down in the Texas market already. It was more of a handoff, transition and let them develop and run those going forward.

We’re going to make our way in Preferred Dermatology and the process there. You recapitalize that business by selling it to a private equity group. Before we go there, what did you learn from your previous transaction and the transaction with Concero about the sale process, diligence and integration? What were the key takeaways for you that you brought to Preferred? I’m interested to know what you learned from those two transactions.

The original one was from ‘97 and ‘98, in which the move came down to Dallas. That one was a little bumpier. That was the first experience with a group where I felt that you need to be aligned with either your private equity group or your new partner in business going forward. What you don’t want to have, either from the buyer’s or the seller’s end is some remorse after the fact. That’s key in anybody that’s looking to sell or buy a practice or business. You have to have the right partner.

How did you get comfortable when you thought you had the right partner? That point is well taken. We oftentimes will see either a seller or buyer feeling some remorse. When we go back to it, we understand what the keys are but I’m interested to hear how you got there.

The first time around, you had to experience it. From my perspective, I didn’t know what I didn’t know. That was a learning process. You have to go through that and you don’t want to make that same mistake. A lot of people on the business side don’t do enough diligence. When they hear or see dollars or they get a dollar amount presented to them, they zero in on that versus understanding what does the long-term transition looks like? What is the exit strategy at the next level or if there is one? What’s your bite of that apple the second go-round? Some people want the check.

MAU 9 | Doing Business Transactions

Doing Business Transactions: You need to be aligned with either your private equity group or your new partner in business.

 

We advise clients on this all the time, and we tell them it’s not only about the money and the terms. It’s about all these other things that you’re referring to. How did you get comfortable with your transaction? Did you get comfortable that you were picking the right partner?

On the third go-round, I was the most educated from that perspective. I helped the primary owner of the practice to determine maybe the potential pitfalls. A lot of PE back groups were coming through Dallas. Dermatology is still a hot acquisition specialty now.

Before we get to dermatology though, I want to stick with your Concero because that was your on the ground MBA that set you up for this next transaction. It’s important for people to hear what you went through in those early transactions that set you up to have a nice transaction in Preferred.

The first transaction from ‘98, the group that was out of Cleveland had buyer’s remorse. That deal was 75% cash and 25% earn-out. Some companies, when you are not aligned on the go-forward path, there are good partners and bad partners, in the case of a bad partner, if there’s an earn-out involved, they might want to do anything in their power not to pay the earn-out. They already have something. If it’s not producing or if it’s flat, depending on what that earn-out is tied to EBITDA or net profit, there are little ways and loopholes to circumvent paying out more cash to an existing asset.

You’ve given the M&A Unplugged community a big nugget here on earn-outs. I hear a lot of stories about earn-outs and they make sense in the right situation and they can be good. As Jonathan is pointing out, they can also be bad. The devil is in the details, how they get crafted, how your advisors bring you through that. I will tell you, this is where advisors make a big difference. I’m not only talking about M&A advisors like myself. I’m talking about M&A accountants and attorneys who go through a lot of deals and understand how to craft an earn-out so you can avoid a lot of the misunderstandings that can naturally happen. For people who don’t understand what an earn-out is, it is a promise for future payments if certain things happen. Those things could be any number of things. They can be revenue, adjusted EBITDA, a key employee staying with the business, or client retention. It’s an area where people can get tripped up quite a bit. That is a key nugget around earn-outs and understanding what you’re getting into when you agree to do something like that.

The safest advice I would give anybody going down this road and in healthcare is I would avoid any terminology of an earn-out, a seller note, or things of that nature. The advice that I even gave the physician here is, “Be happy with what you get at close and you have to assume that you will not get any seller note or earn-out dollars down the road.” If you’re okay with that, I would move forward from the financial component of it.

The thing I would add to play off of that is, anything that you don’t get at the closing table is certainly at risk. There’s a way to protect that risk. There are thoughtful ways to go about it so you can secure those payments as the seller. As a buyer, you want to make sure that you’ve gotten true value. It comes back to, “Do you have the right advisors that can bring you through that funnel?” Jonathan, is there anything else about your experience in Concero before you moved over to Preferred? I want to move into that.

That was from a lifecycle and a career perspective. The decrease in the market place for SAP implementation partners was lowering. That was an industry move for me because what you could see back was companies like SAP and Oracle. They were bringing more and more of those consulting services inhouse because they were quickly figuring out that if the software cost was X, the implementation costs would usually be 3x of that number. They were leaving a lot of money on the table and they were slowly getting rid of the bigger implementation partners. You could see the downturn in the opportunity for a boutique firm like ourselves.

Let’s move on to Preferred. I’m amazed at what you were able to do here and we’re proud of you as somebody who’s known you for many years. You went from software implementation and you now move over into derm. That’s the equivalent if you look at diving a triple gainer with a double twist and a backflip thrown in there. How did you make that leap? What was it that got you from software in both implementations over to derm? Let’s get into that transaction.

Originally, when I knew I was selling Concero, it was like, “What’s the next step?” I thought perhaps I would be an independent contractor and go manage software projects or sponsor software projects for companies. Through a third-party friend, I ended up getting introduced to Dr. Matthew Barrows. He was on this cusp, he had these ideas, “I want to have a little bigger footprint. I’m not sure how to get there. I’m a doctor and I didn’t go to business school.” As you know and many people that go to any family practice or any specialty, their model is not to have a business person or a business team. They have an office manager or practice manager and they’re task-oriented, running day-to-day operations. I don’t think they understand how to grow a business, expand profit, margins, services and look for things to improve the patient experience. I don’t think they’re good at understanding what they need to do to better the ultimate financial model of the company.

You got introduced to Dr. Barrows. Tell me, how did you guys decide to get into business together? Was there one location at the time when you joined?

There were two up and running locations. A third one was launching. It was him at three mid-level providers. We talked about things like an exit strategy. It was an initial high-level business meeting. I started asking him questions, “What do you want to do? How long have you wanted to do this? Do you want to do this until you fall over? Do you want to take on partners? Do you want to sell the whole thing and walk away?” Through the course of that conversation, he felt that I could add some value and I felt this would be a great opportunity. It was local and it was a new challenge.

Was the understanding that you were coming on to essentially build this up and package it so that you can have an exit or a recapitalization?

Some people just want the check. Click To Tweet

Initially, that was not the plan. He was unaware of an operational perspective where he was bleeding. He could see some revenues but he can in turn. This was checkbook management back then and how much was left over for him. He could see growth on the collection side but he wasn’t seeing growth on the income side. Not understanding where your burn is in certain areas if you have leakage or things of that nature where you’re inefficient. I told him that I’d come in, start trimming the fat and try to identify areas of improvement. Lean it up before you take on new opportunities and services for your patients.

You led the effort to bring more operational efficiencies. I’m assuming you also led the effort to start to add on new services. When did you start to make acquisitions to add-on locations?

Those were opportunistic things. Our model was organic growth and we got efficient in how we did things operationally and I wasn’t getting too granular in looking at things always in a dermatology light. I try to look at everything from a patient perspective. What is attractive if I’m looking for a dermatologist? He was leveraged into a couple of key areas within that specialty and I thought that was a potential risk for him as well. Every year you’re dealing with cutbacks for reimbursements. All we tried to do, like any portfolio, we try to diversify those revenue streams.

Now you’re on the other side of the equation. You were a seller before and now you’re in a position of acquiring. You did two acquisitions before the recapitalization?

We did.

You said you were opportunistic about those. Were those practices that came to you and said they’d be interested in selling out or did you go out and proactively find them?

They came to us with different third-party representations. They fit what we were trying to accomplish in terms of where we wanted our footprint geographically here in North Texas. We were selective in some of the organic development areas and these came up as a great opportunity to pick up a patient database. In both cases, they were in excess of twenty-year practices located in their same buildings. They had a brand and both physicians ironically knew Dr. Barrows. There was a high comfort level that they weren’t getting bought by a corporate-owned company and there was still going to be a localized family feel going forward.

You acquire those practices. Did those doctors wind up staying with you? Did you need to get new providers?

In both scenarios, the doctor was going to be a one year stay and exit, which would obviously give us time to transition for new physicians or new providers. In one case, the physician in the second acquisition is still with us and she wants to stay as long as we’ll have her. A lot of times what changes the mindset is they’re no longer dealing with the business aspect of it and go back to what they originally loved which is treating the patients.

You’re an acquirer now. You had been a seller before and now you’re making these acquisitions. What did you learn in acquiring those two locations?

Probably the biggest thing to my fault and to our fault is we probably weren’t as diligent on the analytics side as it was to us when we were being acquired through our current private equity group. That’s been a good learning experience. We basically did enough due diligence and reviewed the book of business and the financial analytics that were presented to us. We did some QA, billing and coding reviews but the level in which most of these acquisitions happen is exponentially greater than what we did on our end to go by what would be considered a small acquisition nonetheless.

If you were to do it again, what would you do differently this time in acquiring to shore up those analytics and what we term as diligence?

The process in which we follow to be acquired by the private equity group, we would do that. We would implement that same process going forward with other potential acquisitions. We’ve had conversations with some other folks locally here in Dallas and outside of Dallas. The best thing now is the bandwidth and some of the support of people who are true analysts that do that diligence on a daily basis. That wasn’t my strong suit. I had never gone into it at that level, certainly from a CFO or a financial analyst position. It’s great to have a partner now going forward where we have that opportunity to lean on those people heavily.

MAU 9 | Doing Business Transactions

Doing Business Transactions: Be happy with what you get at close. You have to assume that you will not get any seller note or earn-out dollars down the road.

 

You gave us another nugget there which is it’s important during the diligence phase to bring in subject matter experts. As a matter of fact, we’re going to have in an episode a senior partner from a CPA firm here in Chicago. His name is Tad Render from Miller Cooper and he’s going to talk specifically about diligence and how to go through it. Jonathan, I hear this often that people cut corners or maybe didn’t fully contemplate all that goes into diligence. We tell clients this all the time, “You have to pay particular attention.” In some industries, it gets way beyond the numbers. You’ve got compliance issues and all sorts of things that need to be contemplated irrespective of what happens when you have to consider integration, the cultural issues, the HR issues, human capital, all of those sorts of things.

That’s probably the biggest change for us going forward. Everybody zeroes in on the docs in healthcare and some of these healthcare acquisitions. It could be dentistry, orthopedics, gastro or dermatology, where the hotter acquisition targets going on in the country, specifically in Dallas. Everybody zeroes in on the financials and the quality of earnings but I’m telling you, one of the biggest pitfalls in healthcare is governance and compliance. The billing and coding review process is paramount in any acquisition if you’re a buyer. If billing and coding have not been done properly, either intentionally or inadvertently, things like Medicare, that is not an audit that you would want to deal with because as the new owner albeit at an asset acquisition, you are still going to be liable for that going forward.

Jonathan, you’re building up the practice, got some acquisitions you’ve made, getting more efficient and this opportunity comes your way, a private equity group that’s focused on the space approaches you and they’re interested in potentially getting a larger footprint in Dallas. Bring me through what transpired there. Did they reach out to you directly? What happened from there?

Six months after starting here a few years ago, let’s look at what the value is of the practice a few years ago. We went through this exercise and had a corporate value placed on us. It’s an evaluation, a 90-day due diligence phase where you’re under exclusivity in NDA. Over time, we probably sat through about 9 or 10 different PE-backed platforms that came through town wanting to acquire us. We listened to every presentation and trying to find this right partner. You know this bubble so great. Can you afford not to be a part of something bigger or from Dr. Barrow’s perspective, “How can I mitigate risk? I want to continue to grow but I’m personally guaranteeing all my loans and leases to new locations.” How do you remove some of that risk on his end and continuing your growth to where you’re not compromising future insurance contracts? If it ends up 3 or 4 big players in Dallas, you certainly have a risk that you might not have a certain commercial payer contract that you can be a part of.

Jonathan, tell me, how did you first start the conversations with this private equity group? Did they approach you? What transpired from there?

As we went through some of these, we were involved in a meeting with this group through a different derma pathology group. That relationship and that building process went over a six-month period and their model was different. We were attracted to it and they had acquired four other companies in the previous seven years. They are a business, as usual, type group. They don’t make changes to the management team. They look for certain qualities of a potential acquisition. As we had deeper conversations with them, we were on their radar and we liked what they had to offer and what their plan was. We were trying to protect our culture, our clinical experience, our patient experience, and our employees. As we had these conversations, we entered into the due diligence phase with them to explore what this would look like. We had enough knowledge, history, and experience with the other PE-backed groups. We knew where we were going to land on the dollars, it was where everything else fits.

You had other conversations with other private equity groups about potentially selling. You had gotten some indications of interest from them. From a value perspective, you had a rough range of values.

They were all close. Everything’s EBITDA and what are you getting as a multiple of that? We were considered by many to be a prime acquisition target. We had diversified and expanded the service offering to patients, bringing in dramatic pathology in-house. There were radiation services. There was a heavy beef up on the cosmetic side. There’s a plastic surgeon and do closures. If you went to our website, we have a strong online presence and good reviews on Google. All that SEO was in that branding and imaging that we work so hard for was starting to present itself to other companies looking at us and saying, “We’re checking all the boxes.” If you were a patient and you went to our website, you can see and be like, “I have options.” That was what it was all about from a patient experience perspective.

You guys were building a practice here. You’re doing acquisitions, making it more efficient, and growing in lots of ways. Was there any thought that you were selling too soon, that you were selling before you had hit a critical mass that would have delivered you? It may be a higher multiple or a better EBITDA that you get against the same multiples so you could have gotten a better walkaway. Was it time for you to take chips off the table and join up with a larger group?

I’m probably going to butcher this answer for you because there are a lot of touchpoints on there that you referred to where I’d like to make a point and I use this example all the time. Instead of getting acquired by some of the other traditional PE-backed groups, we were acquired and get rolled into their platform. I like to tell people we became our own platform, which was different. We had long conversations internally, “Is this too soon?” I’m a little more of a burden the hand guy. We were getting an extremely attractive multiple of EBITDA and removing some of that risk from Dr. Barrow’s perspective and to continue this growth was key. While you get a nice check in the hand, as well as ownership in the neck in our new platform going forward, you will be rewarded with equity in the go-forward plan. Do you take what you get? Would this bubble burst next year? We’re not going to see the multiple that we got, meaning you could double your equity, but at the multiples half, essentially the net is the same. Every year you run the risk of what this government healthcare looks like. You never know what you’re going to get reimbursement-wise or what cuts you’re going to face on a year-to-year basis.

Going back to your comment from things you learned a long time ago, you talked about alignment. It sounds like you had a perfect outcome here. We call this a recapitalization. You didn’t sell 100% of the business. You sold a good portion of the business. You’ve got a great partner that’s willing to invest in your business, but now you’re growing it together and they’re giving you the autonomy to do that, but under the umbrella, not only their capital but probably of their expertise and their team. Potentially somewhere down the road, there’s a second bite at the apple and you’ve got maybe even a much bigger payday.

That’s correct.

It’s all about what matters to you. It sounds like you could have continued to grow this on yourself, increased your EBITDA and maybe gotten a higher number at the end of the day initially. This outcome long-term makes more sense for you. It’s where you guys were at in your personal lives as well as where the business was at.

The billing and coding review process is paramount in any acquisition. Click To Tweet

We would have had to have taken a step back if we were to continue down the road of doing everything in-house or on our own with it without some third-party investment. We were sitting on the bandwidth side, we probably would have had to utilize third parties on the due diligence side. There was more attention given to who we were acquiring, what their history looked like and what risk we would have down the road versus looking at the quality of earnings component.

I’m sure diligence in this transaction was beyond anything you had seen before. You’ve got a private equity group that has teams of analysts and they know how to do this. What did you learn? What were your key takeaways from this acquisition process with this private equity group that stuck with you?

The depth of analytics and the attention to detail, especially on the governance and compliance pieces of this shed some new light into how even looking at us now and how buttoned-up we want to be for the next level. If and when there’s the next level, things that we’ve implemented on a go-forward plan, bringing in a certified dermatology code or to audit charts on a quarterly basis with all of our providers, and utilizing another third-party to audit our own audit. You’re always prepared. You’re always taking the steps necessary, HIPAA compliant, OSHA compliant, there is a number of things that a lot of practices or businesses might not pay as much attention to and they become reactive. When something happens, naivety isn’t going to get you off the hook. Avoid writing a check or in some cases, you read stories all the time where it can be criminal if you’re dealing with government entities.

During the diligence process, did they find anything? Did they come up with anything that was material that changed the deal at all? Are you fairly buttoned up and some of this compliance stuff may come to the forefront but it didn’t change the value of the business?

We had no value change in the end. I might even say it’s rare. I haven’t seen some of that or some of the dollars associated with the backend or how it affects your equity going forward at the next level. We were pretty comfortable. This was the first healthcare specialty acquisition for this group. They had four other disparate acquisitions that they look for key indicators of what they want to invest in with family wealth money and not looking at it as a five-year flip in their portfolio.

You’re settled and now the acquisition is done. Where are you taking the practice now?

We had our anniversary. The transaction was May 1st of 2018. It’s been a great learning experience for both parties. We still are continuing down the road following our organic growth model, the blueprint that we’ve used over the previous years. That was attractive to them initially. Our people and virtually low to no turnover is attractive to them. We’re staying the course, doing what we need to do, never feeling like we’re in a position that we’re building this to sell it at any given time. We’ll always be in a position should an opportunity present itself to be compliant, buttoned-up, have maximized our profit and the ability to look for a top multiple as this EBITDA number grows. Finding the right partner at the next level would be key as well.

Where do the acquisitions stand? Where’s that on your radar as far as growth goes?

We’re selective. We’re not out doing the EBITDA grab. We’re not trying to write new checks and bring others into the fold. Any potential selective acquisition needs to be, one, the right cultural fit. You talked about meshing and integrating other companies. Sometimes it’s a square peg round hole. That’s not the answer. You’re looking at it on paper and we try to look at, “Is this practice representative of what we do? If a patient went from one location to this new location, would it feel the same to them?” Be it the physicians or the staff. Systems are easy. Is there quality of care? Is there patient care? Is there patient experience? Do they treat their patients the same way? Do the docs have a similar personality and a similar outlook? Are they aligned with us the way that we want them to be aligned with our group going forward?

Acquisitions are on the table but you’re going to be careful about that. You’re not only going to add EBITDA in but if it makes sense, you guys are open to it.

Attractive acquisition for us would be a practice that would have a few locations, a handful of providers already establish, patient database in a geographical area, in diameter around Dallas that we could immediately come in and expand the footprint. Instead of establishing an organic location and trying to compete with somebody that’s pretty established, that build or buy mentality.

Jonathan, I can’t thank you enough for joining me on the show. You gave the audience, our community some tremendous insights here. I’m asking all my guests over time, maybe I’ll put together a little romp to survey here. What’s the best business book that you’ve ever read?

I’ve not focused on the business book. I know you’re talking about this before I got inundated enough even in grad school. The Harvard Business Review, business cases, and case studies were good. That’s good information and it applies to what I was going to be doing and doing going forward. It was all relevant to me. Those case studies were beneficial. I can look back many years and take something from every one of the case studies and apply it to what I’m doing now.

MAU 9 | Doing Business Transactions

Doing Business Transactions: The best thing is the bandwidth and the support of people who are true analysts that do that diligence on a daily basis.

 

I used to read those case studies. It’s been a long time since I’ve read any of the Harvard Business Review case studies, but I can still remember to this day some of the case studies that I read and thoughtfully done by some of the leading scholars in the world. Jonathan, if people wanted to get in touch with you, how can they do that?

They can go to our website www.MDBarrows.com. The office number is (972) 390-9002. My email is [email protected]. If you need to call or text us at off-hours, I’m available via cell (972) 679-3530.

Jonathan, thank you. It’s been a pleasure and congrats on all the success.

Thanks, Domenic. It’s good catching up with you.

To recap for the M&A Unplugged community, we got some tremendous nuggets from Jonathan Banta. He’s been on both sides, on the acquisition side and on the seller side. A couple of things that he brought out that resonated and things that we talk to our clients about all the time. One being alignment, whether your selling or you’re buying, are your interests aligned with whoever is acquiring your business or whoever you’re selling to. It’s critical. It keeps you out of the remorse stage and you can get there with a little bit of planning, forethought and thinking simply about who would you want to buy your business? If you’re on the seller side. If you’re on the buying side, building a strategic plan around who do you want to go out there and acquire so you’ve got the right alignment. He also brought up earn-outs. I hear a lot of stories from people about earn-outs and the ways that you can get tripped up with an earn-out.

Earn-outs can work but you need to have the proper advisors with you every step of the way. There are people that do this day in and day out. We see them all the time. In my practice, we work with a ton of M&A focused accountants and attorneys. If they’re crafted right, if the parties go in with the right intentions, it can work out. You have to make sure you’ve got people with lots of years of experience and many deals under their belt so they can guide you through that. The third nugget we got from Jonathan was the diligence phase. Oftentimes, people are excited to get to an accepted LOI that they’ll take shortcuts in diligence. They don’t understand how comprehensive due diligence is when you take a step back.

Jonathan pointed a few things out in our episode where he wished he would have done more diligence. Having gone through this a couple of times and with a sophisticated acquirer, he got to see what comprehensive diligence looks like. I’ll say this and this will be a common thread probably through all the episodes. The right advisors can save you so much money and time. We thank Jonathan Banta for joining us and giving us this great information. If you would like to learn more about the process of acquiring or selling a business, please visit our website at SunAcquisitions.com or feel free to reach out to me at [email protected]. I look forward to the next episode. Until then please remember, scaling, acquiring or selling a business takes time, preparation and proper knowledge.

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About Jonathan Banta

MAU 9 | Doing Business TransactionsJonathan Banta is the CEO of Preferred Dermatology Partners, an affiliate of Dermatology and Skin Cancer Surgery Center.

On this episode, he discusses his experience in preparing and selling businesses, the importance of earn outs, knowledge learned from previous transactions, and streamlining different businesses.

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