How can your data unlock value during a transaction?

22 November 2024

Increasingly, we are seeing the central role of data during transactions in terms of attracting investors and driving optimal values. But how can you leverage the data within your business operations to unlock and drive value during a transaction? And how do KPIs vary across the healthcare and life sciences industry?

Suneel Gupta, Head of Private Healthcare, comments: “We are coming off the back of a period of increased uncertainty, largely driven by the rising cost of debt. This has resulted in the elongation of acquisition process timelines, driven by a desire for deeper and more robust due diligence across multiple streams, not just the financials, with strategic fit becoming a more prominent feature of any commercial due diligence. There has remained ongoing interest in ‘pockets’ from private equity for businesses that can demonstrate stability and future growth.

With the markets now stabilising, it is widely anticipated that healthcare will once again be an attractive proposition for trade buyers and private equity investors alike, with a broad range of opportunities to suit all types of risk appetite. Therefore, it is crucial not to underestimate the importance of data.”

Why is data so important during a deal process?

Data is key to demonstrating the value of your business to potential investors. In a competitive environment, with increasing expectations from buyers for quality data, being able to articulate your business’s story with robust data to support your key messaging is vital to inspiring buyer confidence and driving more serious offers.

Active collation and monitoring of data before a transaction enables the seller and their advisers to make better-informed decisions regarding the presentation of the business for sale to maximise value. In addition, understanding potential data weaknesses early allows the seller to take corrective action in advance of speaking to buyers and/or have a clear strategy for reducing the likelihood that these challenges may disrupt a transaction. Corrective action may include implementing new operational processes for monitoring key metrics ahead of time to tell a more compelling story and protect value.

Being data-rich and well-prepared puts a seller in a stronger position to drive a more efficient sales process, reducing the amount of distraction so they don’t take their eyes off day-to-day trading in parallel to running a transaction process.

Unlock value with data analytics

We are seeing deals data analytics tools and dashboards playing an increasingly important role in due diligence.

Graham Weston, Deal Services Data Analytics Lead, comments: “During a transaction, we see buyers and sellers who don't necessarily have full confidence in the data ahead of starting a process. As a seller, prioritising confidence in your data, and ensuring you have a strong idea of what's accurate and what needs to be improved, will pay dividends when you're in a transaction. Locking down your numbers ahead of speaking to bidders will allow you to maintain the consistency of messaging, which is critical in maximising competitive tension, and therefore deal value, as bidders will have been making fully informed offers throughout the process.

We work with clients ahead of a transaction to clean and reconcile financial data, which can be linked to operational KPIs and presented in an engaging and user-friendly dynamic dashboard. From a transaction perspective, on the sell-side, this gives bidders the power to interact with and interrogate your data. It brings your key selling messages to life, evidenced with your historical data. We’ve seen this have a big impact in terms of making the transaction process more efficient and maximising value. In addition, a clean dataset is an additive to shareholders as data analytics dashboards can be utilised to drive operational efficiencies and aid the day-to-day running of your businesses.”

How do KPIs vary across healthcare and life sciences?

Across the broad range of organisation types, sizes and maturity levels within the healthcare and life sciences industry, what financial and operational KPIs should be tracked?

There are operational nuances that impact KPIs by subsector and can influence investment decisions. Some of the more common ones we would expect to see are listed below, albeit please note that this is by no means an exhaustive list:

Quality of data and ability to demonstrate your business journey

Ability to present consistent data over a period of time.
Ability to include and separate the impact of any previous acquisitions.
Ability to demonstrate the impact of new products/services being offered.

Operational and cost metrics

Occupancy/void trends on an absolute and rolling average basis.
Average revenue or fee rates per customer/user/child/treatment trends.
Trends in sales volumes.
Private fees versus public funds revenue ratios.
Tracking of trends in cross-sell and up-sell dynamics over a historical period.
Customer concentration and longevity of relationships.
Contractual underpinnings for revenue, including minimum order quantities.
Sustainability of cost base and standard costings, with visibility of contractually secured rates or fixed terms and trends in manufacturing costs as a proportion of revenue.
Tracking of average staff costs per head/service user/child and rolling average staff or wage costs to revenue ratios.

Customer attraction and satisfaction

Customer acquisition cost (ie cost of attracting and onboarding new customers) trends.
New customer conversion ratios (ie opportunity and pipeline conversion).
Average project or trial completion times.
Client satisfaction scores.
Strategic partnership growth rates, funding secured rates and regulatory approval success rate trends.

Strength of relationships and visibility of future trading

Customer concentration and longevity of relationships.
Contractual underpinnings for revenue, including minimum order quantities.
Future pipelines and visibility of future revenues, secured orderbook or clinical trials.

Key recommendations for exit planning for healthcare and life sciences businesses

To maximise value and achieve a successful outcome, it is important to be proactive in planning for an exit. Drawing on our expertise in the healthcare and life sciences industry, our transactions team helps you identify any gaps in your core data, both in terms of operations and financial information.

It is never too early to think about data that can be included in both succession and exit planning. This will maximise value for exiting business owners and give future business owners the tools and insights to maintain its success going forward.

Read more about how we can help with deal preparation for healthcare businesses.