Who are we? Neil Blair Managing Director KPMG Corporate Finance

Presentation on theme: "Who are we? Neil Blair Managing Director KPMG Corporate Finance"— Presentation transcript:

0 Building Value in Your Clinics KPMG Corporate Finance September 20th, 2013

1 Who are we? Neil Blair Managing Director KPMG Corporate Finance
(416) Iain Gallagher Vice President KPMG Corporate Finance (416)

2 What do we do and why is it relevant to you?
Buy Sell Finance We help companies buy companies in order to grow. We assist companies in selling their businesses and maximizing value. We help companies access financing through chartered banks and alternative finance providers.

3 Who are we? We consistently advise on more middle market transactions than any other advisor in the world, ranking #1 for the last five years. 2012** No. of deals 1 KPMG 332 2 PwC 331 3 Morgan Stanley 219 4 Rothschild 212 Goldman Sachs & Co 6 IMAP 196 7 Lazard 187 8 Deloitte 185 9 Nomura 157 10 Barclays 154 2011* No. of deals 1 KPMG 360 2 PwC 270 3 Goldman Sachs & Co 238 Morgan Stanley 234 5 Ernst & Young LLP 226 Rothschild 205 7 JP Morgan 195 8 UBS 194 9 Credit Suisse 189 10 Bank of America Merrill Lynch 179 2010* No. of deals 1 KPMG 321 2 PwC 253 3 Deloitte 241 Morgan Stanley 236 5 Goldman Sachs & Co 230 Lazard 224 7 Rothschild 213 8 JP Morgan 197 9 Credit Suisse 189 10 IMAP 180 2009* No. of deals 1 KPMG 287 2 PwC 255 3 Rothschild 196 4 JP Morgan 191 5 Goldman Sachs & Co 175 6 Credit Suisse 174 7 Morgan Stanley 171 8 Lazard 170 9 Deutsche Bank AG 167 10 UBS 165 2008* No. of deals 1 KPMG 483 2 PwC 387 3 UBS 293 4 JP Morgan 285 5 Rothschild 282 6 Deloitte 272 7 Bank of America Merrill Lynch 264 8 Citi 253 9 Goldman Sachs & Co 249 10 Morgan Stanley 247 Source: Thomson Reuters SDC *Closed transactions with undisclosed values and values up to $500 million ** Announced transactions with undisclosed values and values up to $500 million

4 Why are we here? Recent KPMG Corporate Finance transactions and credentials in the diagnostic imaging space... acted as exclusive financial advisor to KMH Cardiology Centres Inc. in connection with financing from Alaris Royalty, to fund a recent U.S. acquisition and future growth. April 2010 KPMG Corporate Finance KPMG Corporate Finance is currently advising CML on the sale of its diagnostic imaging business to a number of different buyers. Ongoing is currently advising a Quebec based clinic group on the sale of their diagnostic imaging business. QUEBEC BASED DIAGNOSTIC IMAGING CLINICS KPMG Corporate Finance Ongoing CONFIDENTIAL

5 Preparing Your Business
Sale planning should be commenced immediately - careful consideration of the following factors can lead to increased marketability and a higher sale price… Financial Operational Legal Market

6 What Drives Value and Price?
INTRINSIC VALUE MARKET DYNAMICS Cash Flow Growth Risk Capital requirements Working capital Market rates of return/cost of capital Capital market conditions and timing M&A environment Credit markets and leverage Strategic options INDUSTRY DYNAMICS PRICE QUALITATIVE VALUE DRIVERS QUALITY OF DEAL PROCESS Market & position Management Competition & barriers Brand name Location Referral relationships Control and confidentiality Quality and # of potential buyers Deal packaging & presentation Negotiating positions and strength Knowledge & information Competition STRATEGIC VALUE AND PERCEIVED SYNERGIES

7 Process If your going to sell – SELL Know your objectives
1. Know your objectives 2. Structure process to maximize outcomes 3. Traditionally that means value maximization 4. Prospective purchasers: the more the better 5.

8 Specialist Capabilities Radiologist Contracts
What have we learned from our recent process that is applicable to this sector? Building Value Specialist Capabilities Equipment Real Estate Leases Radiologist Contracts License Modalities Revenue Breakdown Referral Base Technology Systems Location

9 Who are the buyers? Corporate Buyer Radiologist Buyer
Strategy to grow through acquisition Secure both the earnings and professional fees Professional and dedicated management Ability to leverage professional fees to access greater bank financing Economies of Scale Opportunity to acquire a business and secure long term career

10 Who’s buying and how much are they paying?
Based on market intelligence and our experience, KPMG has seen the following buyer and value trends Buyer Profile Radiologists (and Radiologist Groups) 50% Operators Indicative Value Range – Revenue Multiple 1.0x 2.5x

11 Conclusion Despite industry headwinds Diagnostic Imaging clinics remain an attractive asset. This has been reflected through strong interest from multiple buyers in the processes we have been marketing and strong valuations attributed to clinics. Bank financing is readily available. For sellers, preparation is key to maximizing value. A well run, competitive process gives buyers the best opportunity to maximize value.

12 Questions?

13 Appendix

14 Maximizing Shareholder Value
Typical transaction process Pre-sale planning Preparation Execution Preparation Preparation Approach Approach Expressions of interest / Indicative offers Due diligence Final negotiations /completion Thorough financial statement review including identification of normalization adjustments, and working capital management Review of facilities and equipment Assessment of financial information and due diligence readiness Preparation of second tier management team Tax planning and other matters Preparation of financial information (update or prepare forecasts) Review proposed structure for a transaction Preparation of a Confidential Information Memorandum (CIM) Address key deal issues upfront Agree on buyer approach list Commence compilation of due diligence information Approach parties with flyer and Non-Disclosure Agreements (NDA) Warm up discussions with all buyers Execute NDAs Management to present parties with CIM Summary of key legal terms including vendor rights Finalise compilation of detailed due diligence information Receive expressions of interest including indicative offers Assess credibility of potential buyers interest Ensure offers address value and preliminary views on contract Create tension via feedback Narrow buyer list for next phase Consider phasing the release of sensitive information Assist in commercial, legal and other due diligence Provide legal documentation Receive final binding offers Final negotiations and drafting of legal agreements Final DD (including provision of any withheld information as appropriate) Calculation of a final settlement statement / completion accounts Key issues Positioning the company for maximum value Identification and clean up of issues prior to a sale process Key issues State of ‘readiness’ Who to approach and selling story Key stakeholder management Key issues Alignment of buyers to timetable Key issues Level of information disclosure Maintaining tight process Key issues Price Nature of feedback Who to shortlist for next phase Negotiations around exclusivity Key issues Run rate against budget / forecast Number of parties Minimizing distraction to the business Key issues Price Warranties/indemnities Conditions precedent Timely completion Ongoing tie in for vendors

15 Maximizing Shareholder Value
Management and the Shareholders play a critical role throughout the transaction process, outlined below are key areas of support required under each stage of a transaction: Preparation Execution Preparation Approach Approach Expressions of interest / Indicative offers Due diligence Final negotiations /completion Management/ Shareholders: Provide inputs and assumptions required for financial projections Provide inputs to assist in the development of the teaser and CIM, review and approve documents for distribution Collection and preparation of documentation required for the data room Input and review regarding list of potential buyers Final sign off on marketing materials Management/ Shareholders: Collection and preparation of documentation required for the data room Management/ Shareholders: Responses to any queries or questions through KPMG Inputs and review of Management Presentation Final sign off of Management Presentation Management/ Shareholders: Responses to any queries or questions through KPMG Select and approve shortlist of buyers Review LOI terms Input and review of 2nd round process letter Management/ Shareholders: Management Presentations Provide necessary documentation to assist the due diligence process through KPMG Respond to any queries or questions through KPMG Review binding offer Select and approve preferred buyer Management/ Shareholders: Assist and support due diligence Legal review Final approval of sale Key documents Teaser CIM Key documents Process Letter Key documents Management Presentation Key documents N/A Key documents 2nd round Process Letter Key documents Sale and Purchase Agreement

16 Specific Value Drivers
In additional to total revenue, the relative proportion of revenue paid to radiologists will drive value for corporate purchasers. Revenue Breakdown Patient referral base is a key driver of value. A strong diversified referral network, without over reliance on any one individual or group, will drive higher value. Referral Base The RIS and PACS systems used will have an impact on value. In particular, the ability to transfer licenses to new owners and the associated transfer costs will affect a clinic’s value. Technology Systems The transferability and length of a lease will impact value – particularly important for purchasers relying on financial institutions to provide financing. Real Estate Leases Proximity to growing population clusters generally attracts a premium price. Location Impact on value will vary depending on the buyer. Contracts in place and their length will be an important factor for any type of buyer (ie. Radiologist or financial). Radiologist Contracts Unique or specialist skills drive value. Clinics that have developed specialist capabilities (ie. Prostate or Cardiac MRI) will generally attract a premium price. Specialist Capabilities The breadth of the offering available under the license will drive value with different modalities attracting different levels of interest (ie. nuclear generally attracts a premium while X-ray is often less attractive). License Modalities Age and condition of equipment are important considerations. Prospective purchasers prefer to acquire clinics with well maintained equipment and minimal future capital expenditure requirements. Equipment

17 KPMG CONFIDENTIAL The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.