The M&A Perspective

By CINDY SANDERS


The M&A Perspective | Jeff Seraphine, LifePoint Health, M&A, Mergers and Acquisitions, Due Diligence, Integration

Jeff Seraphine

Four Questions for LifePoint Health's Jeff Seraphine

LifePoint Health's Chief Development Officer Jeff Seraphine recently took time to share his perspective on strategic acquisitions and creating true partnerships to enhance the core mission. A founding employee of LifePoint Health, he was named to his current role earlier this year after serving as president of the Eastern Group of hospitals. He is head of the national healthcare company's M&A efforts and also has oversight of LifePoint's strategic resource group, which manages data and insight to help hospitals grow and meet the needs of their communities.

NMN: Over the past few years, we've seen several mergers and acquisitions that made sense on paper but haven't played out as expected once the deal was complete. What are some of the due diligence steps ... and how do you assess the intangibles ... that are critical to smooth integration?

Seraphine: Due diligence is vital to ensuring a true partnership between entities, and we believe that integration truly starts at due diligence. Identifying both opportunities and challenges early in the due diligence process is critical to a smooth transition.

Sellers explore affiliations for different reasons, such as financial or operational concerns, proactive positioning within an uncertain regulatory environment, and competitive needs. We work to understand early in the process why an organization is looking at affiliation options, what challenges it faces, and what its team hopes to accomplish by becoming part of a larger system. Sometimes an organization can be hesitant to provide too much information because its leaders are concerned that certain issues could deter us from a purchase, but unless there is a significant problem that could really harm long-term viability or success, this is rarely the case. If we can understand challenges early, we are able to help with interventions sooner, which is better for everyone.

To best accomplish this, it is important to take a comprehensive approach to due diligence and look at a range of functional areas to gain a full understanding of an organization going into a potential transaction. We do as detailed an assessment as possible - looking at operations, financial information and organizational culture - and we segment the information we learn into categories so that we can prioritize and consider areas that could affect a transaction on the front end, during integration, or post integration.

When we assess facility operations, we look at risk factors that could impact overall facility performance, and financial and regulatory risk. If we identify opportunities for improvement in any of these areas, we also consider how we will address those needs. Then, when the agreement is developed, we include the proper protections for risks discovered during the due diligence process.

Contrary to common assumption, financial performance is not the only factor. In addition to overall performance and risk, we put a strong focus on cultural aspects of a transition. We have even added a cultural component to our overall assessment that builds upon LifePoint's priorities including employee engagement and a culture of safety. We believe strong cultures begin with leadership, so we carefully evaluate the perception of leaders, medical staff, and others. And we work to identify gaps in these areas early in the transaction process. We continue to refine the culture component of the overall assessment.

NMN: What steps should be taken to truly integrate cultures and to reassure employees who suddenly find they will be part of a new organization?

Seraphine: The most important thing is for all parties involved to consider and prioritize integration very early - as early as the signing of the letter of intent or memorandum of understanding. Once this commitment to prioritizing integration is in place, you have to work to communicate with and engage your employees, physicians, community and other key stakeholders.

Developing a communications plan from the announcement of the LOI or MOU, through integration, and post-integration is incredibly important to ensure that staff, clinicians, community members, and other stakeholders are aware of potential changes within an organization. Sharing information in a unified voice - both the buyer and the seller together - sets the tone for the potential partnership.

There is no such thing as too much communication with employees before a transaction, nor are there too many times to repeat a message. We know that employees are most concerned about how a transaction could affect them personally - how benefits, compensation, services, processes, and reporting structures could change. For this reason, we try to provide as much information as we can, as soon as we can, while being mindful of the process that must take place to research, evaluate and develop the right integration plan. To reassure them and build trust, if we don't have details to share right away, we try to provide timelines for when they can expect to learn more. And to foster trust, we stick to these timelines as closely as we can.

We are intentional about creating culture points early in the process, from the earliest meetings with leaders, staff and physicians, and we find opportunities to be sure we are sharing LifePoint's culture. For example, we usually have our leadership onsite early in the process to give employees, clinicians, and others the opportunity to ask questions, hear from individuals in our company and put a face to the organization they are joining. We also bring our HR staff onsite as soon as possible within the process to answer the questions employees have about how a transaction would affect them personally.

NMN: Is there a point when it makes more sense to walk away from a deal?

Seraphine: Walking away from a deal is painful and not a decision taken lightly. That is why it is crucially important to conduct a thorough assessment. We try and identify areas of concern early in the process and address how they could be mitigated so they don't take away from the ability for the facility to be successful in the long-term. Regulatory compliance and economic hurdles are the two most common areas of concern. However, if the buyer can navigate these issues, the sale may not be put in jeopardy.

NMN: What's your best advice to a buyer when considering acquiring another firm ... and conversely to a company considering selling to another entity?

Seraphine: To buyers, I recommend investing the needed time in due diligence and integration and do a thorough, comprehensive assessment of an organization. This will help you identify red flags but also spend time engaging with the seller to build trust for a potential long-term partnership. At LifePoint, our assessment tools are continually evolving, and we constantly work to enhance how we approach due diligence and integration. We ensure that an organization is culturally aligned ... and that it is open to change - as there are often many changes that will happen over the course of time.

I often tell sellers two years down the road, we want them to be able to answer the following two questions affirmatively: 1) Did we add value? 2) Did we do what we said we were going to do? Those two questions are what every seller should consider when talking with potential buyers - as they reflect action and trust - two valuable components of a successful partnership.

I would also advise sellers not to assume they can work through the process of selling a facility alone, but instead, to rely on experts to support them. Often, sellers are part of a transaction process for the first time, for one of the most significant decisions a leadership team and board will make for an organization. We recommend that sellers work with professionals who can walk them through the process - such as a broker advisor, lawyer, or business consultant who can help the organization ask the right questions to help deliver the best result.

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