Why is trust important when selling a treatment center?

Trust is the variable that most often determines whether a transaction closes. Without a working level of trust, the process slows, due diligence becomes adversarial, and deals fall apart. Both parties need confidence the other is operating in good faith and has the capacity to follow through.

What questions should I ask a buyer before agreeing to a sale?

Ask whether they have acquired similar providers before, how they plan to integrate your facility, whether they have the financial capacity to close, and how they plan to treat your staff and program after the sale. A credible buyer will have clear, direct answers to all of these.

What does a buyer need from the seller to feel confident in a transaction?

Buyers need complete and accurate financials, a seller who remains focused on operations during the process, and full disclosure of any compliance, legal, or payor issues. Issues surfaced early can often be resolved; issues discovered late in due diligence tend to damage or kill the deal.

What happens if issues are not disclosed before due diligence?

Undisclosed issues, such as payor disputes, compliance concerns, or pending litigation, almost always surface during due diligence. When they do, the buyer may seek a lower valuation, revised terms, or may exit the transaction entirely. Early disclosure gives both parties a chance to work through solutions.

How do I make sure my employees are protected when I sell my treatment center?

Ask the buyer directly how they plan to treat your staff after closing. Experienced buyers view key employees as valuable assets. If a buyer cannot articulate a clear answer, that is worth factoring into your evaluation of their suitability as an acquirer.

Why Trust Is the Most Important Factor When Selling Your Treatment Center

Jun 5, 2018

4 min read

Updated: Aug 27

Kevin Taggart, CM&AP, Managing Partner, Mertz Taggart

At a Glance

Selling an addiction treatment center involves more than financials, buyer interest, and timing. Trust between buyer and seller is the variable that most often determines whether a transaction closes, and on what terms. Knowing what questions to ask, and understanding what the buyer needs from you in return, can be the difference between a successful exit and a deal that falls apart in due diligence.

There has been considerable M&A activity in the addiction treatment industry in recent years, and with it, more questions from owners about what the process of selling actually looks like. This series addresses those questions. Before considering a sale, owners should understand the factors that can make or break a transaction. Here, we focus on the most consequential one: trust.

Seller Beware: What to Ask Before You Commit

In any transaction, trust means something narrower than friendship: enough confidence that the other side is acting in good faith, understands what they are buying, and can close.

When you are the seller, there are questions worth asking before you go very far:

Does my company fit into the buyer’s strategic plan?

This may be the most fundamental question. If you cannot understand why a buyer wants your facility or program, that gap will show up in every subsequent step. Ask directly: Have they acquired similar providers before? How do they plan to integrate your facility? Where does your company fit in their broader strategy? A buyer who struggles to answer these questions may not have worked through them yet, and that is worth knowing early.

Is the buyer operating in good faith?

Pay attention to pace and focus. A buyer who is genuinely interested in closing will keep the process moving. One who seems more interested in learning the details of your business than in advancing the transaction may have different motivations.

Does the buyer have the financial capacity to close?

This question gets asked less often than it should. Do they have an established fund, a credit facility, or sufficient cash on hand? If they plan to use a combination of debt and equity, can they secure that financing? Do they have a track record of closing transactions on agreed timelines? These are reasonable, direct questions, and a credible buyer will have reasonable, direct answers.

Will your legacy and your employees be protected?

For many owners, this facility represents something built over years, often with a genuine care mission behind it. Make sure you get a clear answer on how the buyer views your staff and your program’s identity. Employees who have stayed through difficult stretches should be viewed as assets by any serious buyer.

The Buyer’s Perspective: What They Need From You

It is easy to focus on what you need from the buyer. The transaction goes better when you also understand what they need from you. Buyers typically have three main concerns:

Are the financials complete and accurate?

The buyer is placing a significant amount of money on a valuation derived from your numbers. Complete and accurate financials are the foundation of that valuation. If they do not hold up through due diligence, expect a renegotiation, and possibly a lost deal.

Will the seller stay focused on the business while the transaction is in process?

This is a fair concern. M&A processes are time-consuming and distracting by nature. If the business deteriorates while the transaction is moving forward, the buyer has grounds to revisit the valuation. It is in your interest, as much as theirs, to keep operations stable through the process.

Are there issues that will surface later if not disclosed now?

Pending litigation, payor disputes, compliance concerns, labor issues; these things tend to come out during due diligence regardless. Bringing them forward early allows both parties to work through potential solutions while the deal is still on track. Attempting to conceal them is one of the more reliable ways to collapse a transaction late in the process, when significant time and legal cost have already been committed.

Trust Is a Two-Way Process

The further a transaction progresses, the more consequential trust becomes. If either party grows uncomfortable, the transaction is at risk, and by that point, both sides have spent real time and money. Communication is the mechanism that keeps it moving. Get your questions answered early, take the buyer’s concerns seriously, and proceed with care.

You have spent years building this treatment center. Make sure you walk away with an outcome worth that.

Key Takeaways

Trust does not require personal familiarity, but it does require both parties to operate in good faith and communicate clearly.
Sellers should ask directly whether the buyer has a coherent strategic rationale for the acquisition, and whether they have the capacity to close.
Accurate, complete financials are not optional; they are the foundation of the buyer’s valuation and their confidence in the deal.
Issues that surface late in due diligence are far more damaging than issues disclosed early. Transparency reduces deal risk for both sides.
Keeping the business stable and focused during the transaction process protects the seller’s valuation as much as anything else.
Understanding what the buyer needs from you is as important as knowing what to ask of them.

Considering a Sale?

Mertz Taggart has been advising healthcare services owners on sell-side transactions for over twenty years, with hundreds of successfully completed deals across behavioral health, home-based care, and related sectors. If you are beginning to think about a sale, a confidential conversation is a reasonable place to start.

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