Promoting growth and stability

Context

Long-established partnership with five doctors treating over 1,800 patients annually and running at full capacity. Two of the five shareholding doctors were considering their paths to retirement in pursuit of a different “work-life” balance. A well-thought succession plan was needed to preserve the long-term quality and to support the continous growth of the centre (two new LINACs and bunkers in addition to the replacement of two LINACs were needed).

Issues to address

Succession situations often require addressing several aspects simultaneously. In the case at hand, these were:

• Growth financing: the two retiring doctors had little interests in supporting new (significant) investments, which would have meant additional borrowing and little (if any) short-term return on investment. This is a common situation with shareholders of different ages / time horizons. In the context of a succession plan, such situations need to be addressed with appropriate mechanisms to neutralise any conflicting interests between shareholders.
• Valuation: over the years the practice has been developed into a proper company which deserved to be valued as such (i.e. using commonly used enterprise valuation principles). Such valuation levels are higher than what doctors had been historically willing to pay to “acquire a right to work”. This trend – while beneficial to existing shareholders of centres – requires the development of appropriate mechanisms to enable young doctors to become shareholders despite relatively high entry-level valuations. This is key to attract and retain strong medical professionals over the long term.
• Alignment of interests: whatever solution was considered would have to work for and address the needs and expectations of multiples parties, not only for the retiring and remaining doctors but also for the future on-boarding of new shareholders.

The solution

Stingray reached an agreement with all shareholders offering an integrated solution that addressed the above issues and provided the following benefits:

• Flexible individual commitments and conditions: one doctor retiring immediately, one staying for 3 years, one newcomer and all others staying for the long term.
• Attractive valuation for all shareholders: while the one departing doctor sold all her shares, the other partners retained significant ownership alongside Stingray.
• Realisation and de-risking of part of the entrepreneurial heritage: through the partial sale of their shares, the remaining doctors were able to realise a meaningful value while continuing to benefit from the future development of the centre.
• Acquisition of shares by a new young doctor: allowing him to enter the partnership at preferred conditions and with ownership percentage increasing over time.
• Availability of financing: supporting a multi-year investment program, with access to more attractive conditions for the purchase of equipment.
• Implementation of a clear governance model: enabling better communication between partners and an improved management of the practice.
• Overall a much welcome relief for the doctors: securing a long term solution with a reliable partner enabling them to focus on medical activities going forward.