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Mergers and Acquisitions with Michael Roub

George Grombacher January 8, 2022


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Mergers and Acquisitions with Michael Roub

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Book Club featuring Dr. David Prologo

Mergers and Acquisitions with Michael Roub

LifeBlood: We talked about mergers and acquisitions, how healthcare have changed and evolved in recent years, the important variables to consider regarding deal making and the role the human element plays with Michael Roub, Founder of Inflection360, consultant and M&A Advisor

Listen to learn why perfection is the enemy of good and how to avoid making this common error!

For the Difference Making Tip, scan ahead to 18:43!

You can learn more about Michael at Inflection360.com, Facebook, Twitter and LinkedIn.

Thanks, as always for listening!  If you got some value and enjoyed the show, please leave us a review wherever you listen and subscribe as well. 

You can learn more about us at MoneyAlignmentAcademy.com, Twitter, LinkedIn, Instagram, Pinterest, YouTube and Facebook or you’d like to be a guest on the show, contact George at Contact@GeorgeGrombacher.com.

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About The Episode

GG Headshot 2021

George Grombacher

Michael Roub

About The Transcript

Come on

formulae Blood This is George G. And the time is right welcome today’s guest strong and powerful Michael Rob. Michael, are you ready to do this? I’m ready. Let’s do it. Thanks. Let’s Let’s go. Michael is the founder of inflection 360. He is a consultant and advisor for small businesses, helping them out compete in their markets grow and exit at significant valuations. Michael, tell us a little bit about your personal life more about your work and why you do what you do.

Michael Roub 0:39
Yeah, the way you I do is a longer question. But I here I’ve been. I’m originally from the Midwest, but Cleveland, Ohio, but lived around the country and spent the last 20 years in Los Angeles.

I guess at this point, that’s the proud dad of kids off in the world. You know, one out of college in Chicago, another one off at the University of Michigan. So I’ve had a lot of life learning over the last 20 years. But on the professional side, I’d been started as an undergrad at Wharton, been a finance guy most of my career, but made their way into the world of health care about 20 years ago and the business side of that and spent years doing transactional work or strategic roles, or a lot of emerging or growth healthcare companies.

george grombacher 1:22
The business of healthcare, I imagine you see that change? by the minute? Or maybe not,

Michael Roub 1:28
sir. Yeah. Oh, it is a stroke of a pen industry. So there’s no question that I’ve seen a lot of twists and turns. It’s never going away. But you constantly have to recognize that there are changes from whether it’s just payments and reimbursements, or just the way people looked at the healthcare should be provided. So yeah, yeah, it doesn’t get dull, I guess.

george grombacher 1:47
No, I can’t imagine. I mean, there must be so much complexity from a compliance standpoint and a privacy standpoint, and it’s just everywhere you look and turn it’s a different opportunity to do things great, or to really screw things up badly.

Michael Roub 2:04
Yeah, that’s you nailed it. They nailed it. I think the scrub part is what we’re hoping to minimize, but it is hard, you know, and, and it’s certainly, you know, I think that the industry has become significantly more business minded in the last decade, you know, even down to the individual Doctor level, which I don’t think that was the case. In growing up, I think doctors were just doctors, and now they’re having to put on business hats. And, you know, and some do well, and most struggle in that sort of in that kind of changing of how they were thinking about their career.

george grombacher 2:36
So, how, how do you fit in, tell me about the problem that you are solving?

Michael Roub 2:43
Yeah, I’ve really started going back to my roots as an investment banker, when I got into the healthcare space. 20 years ago, I was went off track for me and I started helping run a group of surgery centers. And then where my then started helping build them out to multiple sites, and we sold the business off. So that was how I got into healthcare. And then after that went more back to my roots of doing transactions, mergers and acquisitions, and other capital raising for larger healthcare groups. So Well, I still, that’s probably a big component of what I do today. But I also work a lot with the leadership teams, whether the CEO or the partners of the groups or organizations and really helping them strategically think about how they want to foresee the next year or five years and really create growth plans and really think about the bigger level higher level execution on whether it’s to get money into the business or grow it or really, or just to shape their mindset of how they have to move forward.

george grombacher 3:46
Can I appreciate that? I am probably very much a novice when when when it comes to the world of health care from the outside looking in, I heard some years ago that that there were a lot of physicians who said, You know what, we’re just gonna stop going through insurance. We’re just not interested in doing that. How is that actually played out?

Michael Roub 4:09
I think it’s very, very, there’s a lucky group of doctors who are able to be in a position where they don’t have to worry about insurance. There, they have so much demand that they can manage just taking a higher basically charge what they want to get paid fully for it. In certain markets, certain doctors that works but the vast majority are still sort of require have insurance because how many people want to pay out of pocket for everything they could do. And I don’t know that this so the value of one doctor to another is always appreciated by 99 and 100 patients, I don’t think really recognize how much better one doctor may be than another. So I think that largely has not going away. You’ve seen some other doctors move to concierge models where they charge a big annual premium for you have the privilege of being one of their patients. That works for somebody who has high care needs. So but I Still think I would say that 98% of the population is pretty much doctors are doing what they’re doing. And you know, I’m not saying they always take on the right contracts, or maybe they eliminate some, but it’s still a world very driven by the insurance model. Yeah,

george grombacher 5:13
yeah. That doesn’t surprise me. So out of this, this this provider, landscape physician landscape, whatever the right term is, you mentioned 98%. So the other 98%, who are doing a great job helping patients with within their particular specialty, what what percentage of those are attached to these great big health care systems? What part are just for lack of a better term independent business owners?

Michael Roub 5:46
It definitely varies wildly across specialties. I do a lot of work in the dental industry as much as in the the other medical specialties and medical and dental for example, if you went back 10 years ago was almost everybody was independent. Today, what’s his money is I think last numbers, I was like 15% is moved into a group practice settings are large, large dental organizations. So each year that keeps growing more and more doctors affiliated. I think similarly, without knowing the exact statistics. Similarly, you see that in medicine, well, whether it medicine as well, here in Los Angeles, Cedars Sinai has continually growing and adding groups under their umbrella. Other major health systems have done that as well. And really private equity is, has played a big role in changes in health, the entire healthcare landscape with roll ups and consolidations across everything from ophthalmology to gastroenterology to almost dermatology, if they think of something that they could have more of, and more might be better, somebody is going to start buying them and putting them and putting them under one umbrella, even if they don’t technically even function like they operate under one umbrella. But economics have driven a lot of that they create efficiencies on many levels. So I think it’s going to be just more and more of that to come. And then we’ll see less and less of the independent doctor in the years.

george grombacher 7:10
And so are are you working with independent Doc’s trying to help them find their way forward? Are you working with the actual physicians who are working for the provider groups?

Michael Roub 7:21
Yes, and yes, and I work with, I work with definitely some independent groups, many of those, but often that are looking for taking in capital investments. So they become part of might be the first piece of a private equity puzzle or an add on to an existing group, I work with the private equity groups are looking to add their pieces, I work on both sides of that. So I’ve already worked with group practices and individuals. And then I have some clients, they’re really have no, none of those aspirations, but are just kind of trying to figure out how to scale at least no near term looking for doing add on acquisitions, or just strategic growth in their own existing business. So I guess I would say I’m a little bit opportunistic, and how I work and I just have a unique and interesting group of clients that I tend to spend my time with that have different business needs.

george grombacher 8:13
Would it be possible? I guess anything’s possible. Michael, would it be advisable for just a physician group to start negotiating or talking with a private equity firm without somebody like you to guide that process?

Michael Roub 8:31
I think it would. It’s possible. I would say that I wouldn’t say it’s advisable. I think, the great news is that I think private equity groups is much as they’re obviously looking to get a financial, when they want to get the right partners in place, particularly when they start a new venture. So if you’re early group in it, I do think there’s a lot of learning. I mean, part of the reason I went off where the direction I did seven years, five years ago, sure I was working for Western Dental, the dental space, acquiring practices in last five years, I’ve worked independently with those groups. And I realized that too often, or virtually all the time, those groups get little or no advice or even bad advice. And so they leave money on the table, they didn’t prepare properly. So it doesn’t have to be with me. But I think there’s got to be a real clear understanding of the true value you’re bringing not to be overreaching, just because you heard of things not to give up too much because you weren’t prepared. There’s a lot of preparation gets involved in in looking to raise capital or to partner with anybody. And so I think if you look, I’ve worked with doctors for 20 years, I never have given anyone advice on how to do a surgery. So company, but I’d certainly like so therefore, I’ve been doing this for more than 20 years. It would make sense. They would take my advice on how you should approach capital investment, partnering with somebody and not trying to do it all yourself. Right, that’s kind of getting to the end of the line here in terms of, you know, thoughts and outcomes, but you can’t be an expert at everything. And when you’re not, and you can’t be, find people who are and work with them, even if it’s even at a minimal level, you can get some good guides to pull you in the right direction.

george grombacher 10:16
Yeah. What are some of those those common pitfalls that you see that? Oh, wow, you know, they probably should have thought about this, before they did that.

Michael Roub 10:29
Some of the most like that, sir, come on, the smaller businesses, and this would apply across any business, not just in healthcare is when businesses get valued different ways, but tend to be on their cash flow, or the EBIT da the business most frequently. And I find so therefore, the expense management matters in a business. And because every dollar you save, means the business is worth more than the bottom line, if people pay in multiples of whatever you’re worth, that, that there’s a compounding benefit there. And I tend to find that one of the most immediate issues is overstaffed, underperforming people, and I don’t mean wipe out your whole team. But I’ve had multiple times where I’ve spoken with people and we’re trying to buy them. And recognizing people who maybe didn’t need to be in the organization that six billers in a company, a business looked at once and you’d have two people doing that role, just for people salaries in your put a multiple on that you realize how much money they’re leaving on the table. It’s just they didn’t want to be the bad person, like I didn’t want to sit, but they didn’t want to be the bad person. So they cost themselves several $100,000, you know, in a transaction it get a let alone what they’re costing self each year. So no, I do think that some point, it is hard, particularly for a smaller business owner to because the relationships just get so personal, is to think of it like a business and not let all the personal stuff override, ultimately, they can make a decision. But I think it helps to have an outside advisor or consultant in board, who can maybe help direct and make some of those changes logically. And you need to do it enough in advance before going to partner with somebody else, so that you get the advantages from it. But I think that’s probably the biggest challenge is just the personal element in the relationships within a smaller organization, and how do you navigate those in a way that you don’t hinder your own, you know, your own financial outcomes or your own personal outcomes in a situation like that?

george grombacher 12:30
It’s it’s, I think it’s interesting that I certainly have a tendency to think about a manufacturing company differently than I think about a professional service company, like a law firm or medical practice, but they’re the same things. Right?

Michael Roub 12:44
They are, I think that, you know, the good news is, you know, I think you can think about the complexities of either of them. But you know, if a company makes a widget, you know what the product is, and you know who the end customer here, I think, I think about health care services, you have patients who are clearly your end customer, but depending on how the organization is the doctors, if you have a big organization, those doctors in their own rights or customers as well, because if they’re unhappy, they leave, you can’t just replace one with another. It’s not like a broken part. So you do have to balance both the needs, you certainly have to make sure you’re covering the needs of the patient, that should be paramount. But you also have to be cognizant of these, the biggest asset that you have, which are your doctors and how to ensure that you’re there both being productive, but kind of both being productive, but also going to stay for the long haul one way or another. So that definitely takes a lot of certain personalities and the right team to manage those, which can be very unique personalities at times doctors can be their own challenge. So but any professional organization, I think that was a consulting firm, or a lawyer or a law firm, watching your best assets walk out the door after a transaction, which happened when I was in investment banking, we got acquired and a bunch of people left the firm. How do you manage that? Yeah, yeah, super,

george grombacher 14:04
super unique and challenging in that regard, of just the brilliance of the of the physician, but also dealing with potential ego, which could be catastrophic, and probably kind of stereotypical. And

Michael Roub 14:24
it’s, I learned a lot in my first six years with surgery centers and doctors and schedules and recognizing, you know, their need to be in charge in a room when they’re doing a surgery is part of all their training. But that translates into how they manage all their day to day practice in life that they’re used to being in charge. So when they’re in a situation where other people are trying to direct them a little bit that that is a that takes a little bit of finesse and a lot of learning and how to sort of work with the doctors. If you don’t really want to work against them. It doesn’t it doesn’t end up benefiting anybody.

george grombacher 14:58
Yeah, certainly. That’s Classic how you do one thing is how you do everything? Which, which, which, which absolutely makes sense. And why wouldn’t they? And I think probably in a lot of regards, they certainly can be the person that’s in charge, but they don’t need to be running the meeting, so to speak, you can be the CEO, but you don’t need to be the CFO, you don’t need to be the HR director, right? Yeah. But that’s where I imagine somebody like you can kind of help people take a big step back and reframe the way that they’re looking at how they’re practicing just or how they’re running different aspects of the business and how to proceed through a potential massive transaction of taking on a new partner or acquiring a practice or taking on money. Because while there’s probably room for mistakes, you don’t want to make too many of them. Well, I think

Michael Roub 15:46
it’s like anything a play to your strengths, and you know, where you have weaknesses, be able to wreck guys them and know that somebody else might be better suited to manage those weaknesses than you are. So whether that’s doing a transaction, or just running your day to day business, or your practice, or whatever you’re doing, can’t do it all doctor can’t be doing surgeries and checking in patients, and managing Insurance Billing. And just like any other business, so to your back your other comment in many regards, I think they become much more like any other business. There’s just some unique facets to professional services for sure.

george grombacher 16:21
Yeah. 100%. From what I know about folks, that that that that help people sell businesses like business succession planning and continuation planning, a lot of folks will get all the way to the end. And then they’ll almost sabotage the deal, just because for a million different reasons. How is that in, in in your world?

Michael Roub 16:47
I’ve had deals for we were finishing up purchase agreements, where my clients said, You know what, I decided I want to do this a year of work, I’ve had that happen. I’ve had, that’s certainly happened. What I’ve seen, the biggest challenge I’ve seen with transactions is that it’s an invite piece of advice I heard somebody give years ago when I was in investment banking. So I took it and pretend like it’s my own at times. But you know, you got to focus on what got you to here because more transactions than not, don’t fall through. I mean, reality is if you’re doing just deals don’t happen. So you got to keep running your business, keep doing your day to day, let us do the work on the transaction. And the whole thing is going to be a distraction one way or another, you’re going to have to spend time pulling reports and data and doing things that you don’t really do in a normal day to day basis. And having to be responsive to somebody that is now an other taking up your time and energy. But if you make that your sole focus, the transaction, a business starts eroding. And it can happen quickly. It’s very rare that I start working on a get something under a letter of intent that I don’t see the business or suffer a little bit during that process to the no transaction, because it is a distraction. But I’ve seen some instances where it was like wow. And I’ve seen some deals implode because the business has fallen off so dramatically, and even in three months. Because again, when the doctor and it’s something like where the doctors have the key assets, if they’re not spending all the time, just focusing on being doctors, patient flow goes down, revenue drops down, now you’ve got the buyer going, I’m not willing to pay as much for the business. So focus on what your strengths are, play and let other people step in and do and manage the transaction is the best way to preserve all that you’ve built.

george grombacher 18:36
Like, Well, Michael, that was a good one. But the people are ready for difference making tip, what do you have for them?

Michael Roub 18:43
I’ll use the one that I have to remind myself all the time. That’s an it’s really Mark Cuban’s, but Perfection is the enemy of success. And as much as I’m a detail oriented guy, and I’d like to ultimately get through a transaction, you have to line everything up, at some point good enough is enough to go forward. And if you wait till you’ve perfected things you’re already behind. And things always change. You’re constantly adapting. So don’t wait till you’ve nailed it and gotten it perfect to start taking the next next step forwards, you just need to keep moving forward and recognize the changes, you know, an essential part of the process and adapting. But that that’s something I have to live with every day to remind myself that at times.

george grombacher 19:23
I think that that is great stuff that definitely gets come up. Come on. Yeah, that is one of my favorites right there. And maybe that’s just an excuse for doing less than perfect work, Michael, but

Michael Roub 19:34
I don’t think that’s my DNA. But I but I think that I think everyone’s definition of perfect is different. And I think that’s it if it’s what you live in, breathe your view of what’s good is perfect is somebody else was already there. 10 steps before you got there, like I could have done a lot less and people have been super happy. I think it’s diminishing returns right at some point.

george grombacher 19:55
Yeah. Amen. Well, Michael, thank you so much for coming on. Where can people learn more about you? How can people engage with you?

Michael Roub 20:02
The best place I mean, I have my website in flexion three sixty.com But LinkedIn there are not a lot of Michael routes out there, I assure you is where if people ping me I like to be very responsive. I love to hear about what people are doing thinking. answer people’s questions. I love to make connections in any industry out there and just love to kind of share thoughts with people whenever I can. So that’s a great way to hunt

george grombacher 20:27
me down. Excellent. Well, if you enjoyed this as much as I did show Michael your appreciation and share today’s show with a friend who also appreciates good ideas go to inflection 360 It’s ai n f L e c t i o n 360 calm and then find him on LinkedIn. Michael Rab R O UB. Thanks again, Michael. Thank George ppreciate is great. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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