Dealmakers are used to searching hard for the right opportunity. But sometimes, the right opportunity is in plain sight.
That’s exactly what Jerry Kelsheimer discovered in November 2017, when he approached long-time acquaintance Thomas Ferkovic with an idea to join forces. Kelsheimer had recently launched Exodus Capital Partners and was looking for a company he could get involved with in an operating capacity. Ferkovic, who he’s known for a decade, had spent years building Medic Management Group into a trusted provider of services to help health care professionals manage the business side of their work, and was thinking about ways to protect the company’s future.
“I saw Medic as a company that offered an opportunity to accomplish some personal objectives,” Kelsheimer says. “That included building tangible value and being part of a team’s effort to scale and grow an enterprise. Sometimes you look long and hard for things, and you feel fortunate when you wake up and it’s right in front of you. This is one of those circumstances.”
On Oct. 1, 2018, Ferkovic and Kelsheimer closed a deal to acquire majority interest in Medic Management Group from SS&G, which owned the company for nearly two decades, but was not part of SS&G's acquisition by BDO USA. While neither side was looking to break up the relationship, Ferkovic says there was curiosity about the potential of changing things up.
“For almost 20 years, you couldn’t ask for a better partner than the guys at SS&G,” he says. “They weren’t looking to monetize and get out and I wasn’t looking to say they have to get out. It’s one of those good marriages that you hardly ever have. It was a challenge to say, ‘Wow, maybe this is good for everybody.’”
This week, we examine the approach used to negotiate the Medic Management Group deal and what’s next for the business.
Taking the first steps
One initial challenge to getting a deal done was that Ferkovic had not been actively looking to make one.
“We were convinced this was a transaction that could make sense for the two of us as the majority owners of the business,” Kelsheimer says. “We thoughtfully pitched an unmotivated seller with the thought of creating interest.
“But because Tom wasn’t actively thinking about selling the company, it wasn’t prepositioned for a transaction. So diligence information had to be prepared and sourced. There are certain things companies will do to manage the optics of a financial profile to simplify and tell a story.”
It was a unique circumstance in that Ferkovic and Kelsheimer were on the same side of the table for much of the negotiation.
“I was a buyer and then a seller because of the way the steps had to work,” Ferkovic says. “That allowed us to work together. In another transaction, the person coming in in Jerry’s role would be negotiating to acquire something and you wouldn’t get to work together because you'd be on opposite sides of it. All those things about planning, being thoughtful and putting ourselves in SS&G’s shoes, and ‘What will this sound like to them? Why would they want to do this?’ We got to do that. It was unique positioning for us. It allowed us to have a working relationship as opposed to a theoretical one.”
Finding a third alternative
As Ferkovic began talking to Kelsheimer, he had an idea of what he’d like to see if a deal were to get done.
“He was not interested in selling to a strategic buyer,” Kelsheimer says. “Oftentimes, strategic buyers pay for transactions by consolidating overhead and making organizational changes that affect the lives of sometimes, many employees. He was thinking about the private equity option as a way to recapitalize and position the company for growth. But the notion of working for another person or a private equity firm as the primary owner was not appealing to him.”
Kelsheimer provided Ferkovic with a third option: Partner with him, and move forward without selling to private equity or working for someone else.
“We wanted to add talent and a good partner that would be active,” Ferkovic says. “To add that fuel, add that person and add some capital - that’s why we did it. There are some really cool things going on right now. It’s not time to exit - it’s time to have some fun.”
The objective for Kelsheimer and Ferkovic is to increase the valuation of the company via both organic growth and acquisition activity.
“This transaction is a first step in a planned growth strategy,” Kelsheimer says. “The goal is to get ownership concentrated with an active ownership base and be purposeful in our connection and education to the market. We want to build upon a top-notch talent pool in this company today that we intend to grow. Eventually, we’ll buy companies to add scale to the business.”
Even if the deal hadn’t closed, Kelsheimer says Ferkovic benefited from the process they went through together.
“Tom learned things about his business that he didn’t know that are going to make it a better business,” Kelsheimer says. “You should always be thinking about how you would tell your story, how you would be prepared to present yourself, how to acknowledge the strengths of your company and the areas that at times, could use improvement. Not a bad exercise to go through as you look at how to position your business.”
In the new structure, Ferkovic will serve as CEO and increase his share from the 48 percent stake he owned previously. Kelsheimer becomes president, and through Exodus Capital Partners, owns a stake that is a little less than Ferkovic’s.
Existing directors and employees were also invited to participate in the transaction, an opportunity that many accepted. Financial terms of the deal were not disclosed.
Going forward, Kelsheimer is excited about the prospect of helping Medic Management Group’s clients continue to adapt to changes in health care.
“This is a company that delivers value in solving problems for clients,” Kelsheimer says. “You think about health care and the whole notion of how consumerism affects health care delivery today. The importance of access and convenience, economic pressure, top-line revenue pressure, reimbursements, cost structure pressures, legacy costs, labor costs and the like. These are things that we are positioned and prepared to help clients address - and as we address them, turn issues into opportunities.”