Odyssey Behavioral Health

Deal Synopsis

Source

  • 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