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Revolution in a Recession

Nurse Staffing Companies
are Setting M&A Records

ick up a copy of a local newspaper, read a national news magazine, or tune to your nightly television news program and chances are that you will hear about the current recession that the United States economy is in. If you are an owner of a business, these reports are particularly disturbing. With the general malaise affecting the economy, one would think that positioning your company for sale would not be a prudent thing to do. Although this may be true in specific niches in the Health Care market, it is certainly not for the nurses staffing niche. In fact, if you haven't been watching this
"...if you haven't been watching this business segment closely, you are missing a revolution taking place in a recession."
business segment closely, you are missing a revolution taking place in a recession.

Today's nurse staffing company generally has a number of per-diem and traveling nurses whose specialties include L&D, NICU, PICU, ICU, PEDS, ER, PP/Nursery, and Med-Surgical. Usually nurses are available to work any shift in all areas of a hospital or critical care facility. By offering long or short-term contracts in their specific regional location or nationwide, the specialized nurse staff support provider has become a tremendously valuable asset to most hospitals across the country.

Let's take a further look at what is driving the acquisition appetite of the buyers in this area:

    Critical Nursing Shortage

    With hospitals throughout the country demanding more qualified nurses in all of the specialty areas, nurse-staffing firms are essentially being looked at as partners with the institutions that they serve. Hospitals are clamoring for nurses in almost every region of the country. Drawing qualified nurse candidates is becoming an increasingly critical issue in satisfying the total demand.

    The nurse staffing business plan is attractive to potential buyers

    Noticing the tremendous demand for nursing services has certainly not escaped the buyers in the market. The noticeable rapid growth of most businesses in this market coupled with the attractive business plans that most companies in this service oriented sector employ have caught the eye of many merger and acquisition specialists in the industry.

    Several companies have completed an Initial Public Offering (IPO)

    With the successful completion of several IPO's in the buyer community, the acquisition market has been dramatically fueled with new capital. These companies have been aggressively acquiring nurse staffing firms throughout the country. Additionally, those private firms who have access to capital have also had to look at participating in this buying activity or face getting left behind. Therefore, an excellent climate for valuations and acquisitions currently exists.

My associates and I at Aspen have spoken to hundreds of nurse staffing companies over the past year. Although we have successfully completed numerous transactions in that same time frame, it is truly surprising to find so many owners totally unaware of the changing dynamics of the market. However, when asked, they will all tell you that they know a company that has just been acquired. With the big companies getting bigger and the aggressive acquisition activities continuing, it behooves the nurse staffing owner to consider marketing his company or face increased competition and pricing pressures in the market. Simultaneously, the bigger firms are offering benefits to new
"...the bigger firms are offering benefits to new nurse candidates that smaller firms are unable to provide."
nurse candidates that smaller firms are unable to provide. This means that the larger firms will attract the already constrained supply of qualified potential nursing candidates. Moreover, the drastic increase in workman's compensation has placed further burdens on the individual owner. As most business owners will attest to, the annual premium increases in this area can be as high as 25% to 35%. These increased insurance fees have quite naturally begun to erode the excellent profit margins that the smaller firms were generating. On the other hand, the larger firms in the industry are willing and able to offset or eliminate these higher costs due, in part, to their much larger sales revenues and their ability to self-insure their workman's compensation. Essentially, the larger firms will elect to forego paying premiums to State Fund for instance and elect to pay out their workman's comp claims themselves. This enables these firms to have more control over the pricing of their services and, in turn, places a tremendous amount of pressure on the smaller business owner to survive on significantly lower margins.

For many of you who have been involved in the industry for some period of time, you may recall that in the late 1980's and early 1990's that profit margins for nurse staffing firms were significantly lower than they are today. Much of this was attributable to the fact that the hospitals dictated the pricing policies within the market. Acquisition activity during this time frame was almost nil. Today's environment has dramatically changed due to the issues that have been mentioned above. Eventually, supply will catch up with demand and the acquisition pendulum will swing back in the other direction. As is usually the case, the window of opportunity will shut quickly when the market equilibrium has been reached.

If you would like to investigate the merger and acquisition opportunities available to your firm, we at Aspen would be pleased to assist you. Unlike many other investment banking firms, Aspen has
"Unlike many other investment banking firms, Aspen has chosen to not charge up-front fees to potential clients."
chosen to not charge up-front fees to potential clients. In fact, we will not be compensated in any fashion until we successfully close a deal for you. This means two things to you as an owner; (1.) You can obtain professional consultation and a business valuation free of cost or obligation while we attempt to jointly determine our success possibilities in marketing your firm. You will be able to receive a very realistic range of values that we will impart to you based on the numerous transactions that we've completed in the market. We will also be able to provide you with details on the amount of time that you will need to spend in pursuing a sale, as well as, the marketing approach that we have successfully employed over the last twenty-two years in closing deals. (2.) Because we receive no payments of any kind until a successful deal is completed, we will spend a great deal of quality time with you discussing all of the necessary factors before agreeing to market your firm. This means that we will not give you an unrealistic valuation just to have the opportunity to market your firm. We derive no benefit from marketing a firm that we realize has very little chance of finding a buyer. We will be honest, direct and thorough before moving forward with you. We believe that it is this type of personalized service and attention to detail that has served us well with both buyers and sellers over the many years that we have been successfully involved in the mergers and acquisitions arena.

If you haven't already done so and you are ready to participate in the dynamic forces shaping your industry today, call us for a no-fee consultation. Let's talk about why there truly is a revolution taking place in a recession.

Robert A. Veri