Value Engineering: Selling Your Company at a Premium. Part 10: Not All Watermelons are Red or Sweet. Find the Right Strategic Partner.

The articles presented here are adapted from my recent book, Value Engineering: Strategies to 10X the Value of Your Clinic & Dominate the Market. Even though these articles focus on healthcare company owners, the principles apply to all types of businesses looking to increase value and have a premium exit.

Strategic partnerships are like marriages, and both very similar to a watermelon. Why a watermelon? Because no matter how well we pick one by color or tapping sound, we don't know how good it will be until we cut it in half.

As much due diligence that goes into picking the right partner,

sometimes the results may not be what we expected.

To further mitigate the risk, I like to share some of the key points to consider when picking a partner.

1. Don't focus on what you can get out of the partnership but concentrate on the value you can contribute.

A true partnership is a two-way street. No affiliation or relationship can last unless an equal amount of?value is exchanging. If you are there to only benefit from this partnership, do not be surprised if the relationship ends sour. An example of this type of relationship was the former Malo Clinic with its licensees. As one of their licensing program intermediaries, I negotiated and closed Malo Clinic licenses for 17 Clinics in Thailand, Singapore, and Norway. However, the licensor's lack of promised support led to resentments and non-payment of licensing fees by some of the licensees. Finally, a major creditor took over the Malo Clinic's operation for not meeting its debt obligations.?

2. Be sure you and the partner are adding value and not competing with one another if in the same geographic location.

A strategic partnership may be between two competitors but focused on different market segments and customer demographics. For example, you may have a high-end fee for service practice focused on specialty treatments such as cosmetic dentistry. You can create an alliance with a group of dental centers focused on emergency dental services. In this example, both are competitors in the dental market. However, the cosmetic dental center can add value to its customer base through a partnership with a group focused on emergency care when its patients?require those services due to expanded hours often available to emergency patients. On the other hand, emergency dental centers can add value to their patients by increasing their offering to those looking for a cosmetic dentist. The following are some examples of possible strategic partnerships for non- competing businesses in the same markets you can consider:

Dental Clinics: Specialty Providers, Physicians, Hospital Emergency Rooms, Schools, Nursing Homes, Prisons, Tele-Diagnosis Platforms, Dental Tourism Agents, 3rd-Party Financing Companies, Hotels and Concierge Associations, Government & Unions

Veterinarian Clinics: Adoption Shelters, Pet Bakery, Pet Sitting Service, Home Cleaning & Sanitizing Agencies, Pet Parks and Recreation Centers, Pet Pick Up and Delivery, Pet Hotels, Tele-Consulting Platforms, Other healthcare practices

Medical Groups: Nursing Homes, Prisons, Tele- Health, Airlines, Hotels, Sports Centers, Gyms, Schools, 3rd-Party Financing Companies, Hotels and Concierge Associations, Unions, and other Healthcare Providers?

3. Look for partners with different geography that both leverage each other's market to grow the customer base.

A network of businesses across different markets can make a company look stronger than competing rivals, negotiate better with suppliers, and build a more integrated platform for achieving financial milestones while providing greater access and convenience to its patient base. For example, in 2016, I negotiated a deal for a group dental practice based in Thailand, serving Australian patients with a Melbourne dental group. This agreement was for any of the patients visiting Thailand facing any issues with their treatment, they could visit the partner dentist in their home country. This partnership created peace of mind for all dental tourism patients coming to Thailand, and the Australian clinic benefited from a new customer base they usually did not target.

4. Having an open mind with similar long-term objectives

A strategic partnership begins with a loose affiliation between partners. There is no strict legal binding but only a commitment of time and possibly some shared resources. However, finding a partner with similar goals that are innovative, creative, and has identical objectives is better than a partner with different goals?and values. Let's say the long-term plan for your company is to become listed as a public company. Finding a partner who is already listed or thinking of becoming one can leverage the relationship and build a closer and more sustainable relationship.

As much due diligence that goes into picking the right partner, sometimes the results may not be

what we expected.?

Frequently Asked Questions:

Q. We own a 20-physician Cardiac group in London, United Kingdom, and our patients are referred to us by other generalists. It seems to us a strategic partnership can affect our current relationship with our referrals. How can we minimize the risk of losing or upsetting our referrals?

A. You are already getting patients from referral sources; it means you already have a strategic partnership with generalists. However, this arrangement may not be formal, where you both can exploit this relationship and convert it into a competitive business advantage. A strategic collaboration may upset some of your referrals, but you need to do what is right for you and your business. You also may look for ways to add value to your existing referrals through a new strategic partnership. A well-planned, strategic partnership can supply your group with more?patients than a single physician office can ever refer to you. But also, look for opportunities outside of your existing domain. For example, you can work with gyms or fitness centers where customers/patients are cross-referring, and you can give your group an extra competitive edge.

Q. To whom should I assign the role of finding a strategic partner?

A You have an option to hire a consulting company like mine or find and individual on your team or externally with the following attributes:

• Great business acumen
• A strategic thinker
• Excellent presentation skills
• A good negotiator
• A good closer

Q What happens when one partner does not perform as promised in the relationship?

A. In situations where a partner fails to keep up with the promises, it is best always to approach and discuss to be sure both parties have similar short-term and long- term objectives. If the situation continues to not be mutually beneficial, the partners have to cease their agreement. The nice thing about these arrangements is that they can quickly be terminated with minimal or no setbacks to partners.?

Dr. Nazeri has over 30 years of experience as a healthcare entrepreneur worldwide. He has been actively consulting leadership teams of some of the largest privately held and publicly listed companies on strategic growth and preparing them for an eventual successful exit. Dr. Allen has a Dental Degree from Creighton University and earned his MBA in M&A and Investment Banking from the University of Bedfordshire. He is the author of Value Engineering: Strategies to 10X the Value of Your Clinic and Dominate the Market!?Dr. Allen offers a Free Valuation to company owners who are ready for a partial or a complete exit.?You may contact him via [email protected]

This article is based on the author's professional opinion. American Healthcare Capital team of M&A advisors and management team may or may not share the same opinion as the author.