For many businesses, their first acquisition is the most daunting, with uncertainties and concerns about risk, cost, and process—heightened when dealing with a distressed transaction. MCA was engaged by a large non-profit Federally Qualified Health Center (FQHC) in the Southwest to execute its first-ever acquisition. As a provider of a wide range of comprehensive, affordable, and accessible healthcare services to underserved communities, when a non-profit FQHC serving the rural areas of northern Arizona filed for bankruptcy, the client sought to acquire the bankrupt business to diversify their reach into another region of the Southwest and support their mission of improving community health in underserved communities.
The target, a non-profit FQHC network of clinics serving 10 underserved communities, had been forced into bankruptcy due to a variety of factors, including erroneous Medicare Cost Reports, actual revenues that fell below projections, expenses that exceeded projections, and poorly negotiated contracts. As a result, the underserved communities were at risk of losing their only healthcare options.
Because of the target’s tenuous financial situation and the importance of maintaining health care availability to underserved communities, time was of the essence, leaving a very short window to complete a transaction. The project scope began with an understanding of the potential acquisition’s goals and objectives, as well as the target terms and conditions. MCA consolidated the financials by target location, which served as a basis for a complex proforma for each; analyzed all payor, provider, and lease contracts; and performed an asset valuation.
The due diligence process also required extraordinary physical effort, spanning nearly 1,000 miles between the clinics. Three teams were needed to cover all locations, conducting interviews, photos, and videos to document the condition of the facilities.
Based on the findings, MCA conducted an analysis with the client to inform their decision-making process, including providing advisory services on acquisition strategy, agreement terms and conditions, and assisting with bankruptcy-related matters. The finance and accounting function was among the primary challenges, revealing several shortfalls in the accounting systems, and limited access to historical records for each facility. MCA worked closely with the client, the target company, and counsel from both parties.
The engagement required different levels of technical expertise on MCA’s part, including knowledge of healthcare operations, deep pro forma modeling across a variety of scenarios, operations management, and the bankruptcy process. MCA surpassed the client’s expectations, achieving a level of depth not typically achieved in a ~3-week timeframe and helping pave the way for a successful transaction.
Contact us to learn how MCA can help you navigate complex transitions with confidence.
Contact us to learn how MCA can help you navigate complex transitions with confidence.