We sourced an exclusive opportunity with Magnolia, an eating disorder facility
At first, Magnolia was reluctant to engage in conversations as the company was at the cusp of a pivotal year (going in-network and filling out excess capacity)
However, by explaining the benefits of joining forces with a larger group and introducing the concept of an earnout to compensate for future growth expectations, we were able to bring the owners to the negotiation table
Negotiate
The valuation gap (bid-ask spread) was significant
GHA designed a structure that met both Odyssey’s and Magnolia’s objectives. Namely, keep cash at close reasonable, but structure a tiered earnout that would generously reward Magnolia should they meet their forecast, a win-win scenario
Close
As is often the case with small businesses, Magnolia’s numbers did not hold up to diligence
The variance between what was reported and what came out of accounting diligence was too great for the deal to hold in its current version
We worked with both Magnolia and Odyssey to restructure the deal in a manner that matched the results of diligence but that also had both parties enthusiastic about the transaction again
The renegotiation was achieved in under 2 weeks and we closed shortly after
