Medical Records Associates CEO Charlie Saponaro is a veteran of the Boston M&A world, with more than 30 deals to his credit. Yet even he was surprised by the level of deal activity during the pandemic.
“From a business standpoint, environment standpoint, economy standpoint and then from a deal standpoint it certainly has created an environment of, like everybody says, uncertainty,” Saponaro says. “I think that there are some people out there who say, ‘Hey, I need a deal done because of uncertainty.’”
In several of those transactions, Saponaro had to lead sellers who were not quite as sophisticated in the common practices of the M&A world through the process.
This became even more accentuated during 2021, when the amount of M&A activity skyrocketed because of an abundance of capital built up during the pandemic. Some of those companies, especially ones that were sub-$10 million, were not as prepared as their larger, more seasoned, peers.
“That’s a tricky scenario. There are so many deals getting done these days, just in general. And there’s a lot of private equity money out there,” Saponaro says. “When you're going into these types of acquisitions oftentimes, they're kind of tuck-ins or bolt-ons. It's a difficult dance.”
In addition, some of these transactions took place without a broker or banker involved.
That’s where Saponaro says the education process truly comes into play. First and foremost, he says, it’s best to understand whether someone really wants to exit the business, and if they’re aware of the magnitude of due diligence that’s required to get the deal done.
“I'm in the process of buying a business right now and there really wasn't a broker involved; someone made an introduction for us, but they weren't involved in the process,” Saponaro says. “I had put together kind of a schedule of the different stages of due diligence and start off with, you know, quality of earnings and we're going to allocate 30 days for that, and here's what's going to happen during that phase, and then after that we're going to get to more of the legal side with the asset purchase agreement and then the HR and the operating side, but there’s a mountain of information that they need to produce at the beginning for Q of E.”
Then there’s operational due diligence.
“For a seller that's direct it's a new thing for them and depending upon how organized and buttoned up they are internally that could be a challenge,” he says.
It’s why he stresses the importance of communicating early and letting sellers know the reality of the process — that it will involve a lot of work on their end.
That said, for Saponaro, it’s full steam ahead for Medical Record Associates for the remainder of 2022 and into 2023.
“We're in growth mode,” he says. “Our kind of sales engine's been really getting a lot of traction in the last two years, kind of record traction, and then in addition we're just closing these last two transactions between now and year end, so I think 2022 is gonna be a lot of integration simulation — operational year — but still keep the gas on the sales and marketing but we've got a pretty good runway ahead of us.”