Seller Insights: Gary Carlson, North River Physical Therapy
North River Physical Therapy was founded in 1991, and enjoyed over 20 years of success in the Chattanooga metropolitan area. Gary Carlson joined the owner team in 1999 and helped the business grow to eight clinics. Like many in the healthcare industry, Gary was well aware of the many mergers and acquisitions that occur in their line of work and was always looking at new options to continue growing the business. In 2013, Gary and his team decided it was time to sell to a larger organization, and they turned to FourBridges for guidance.
What was your experience like as a business owner?
Much like any business owner, I wore a lot of hats. From an infrastructure standpoint, I had to get smart about rev cycle, IT, payroll, EMR, and really anything that supported the back end of the business. It’s really fun to compete in the marketplace, position yourself, make your own decisions about growth, and be the type of employer that you want to be.
It also came with a lot of risk factors. And while we weren’t outscaled on the back end, we did start to notice some market forces that made it harder to expand. Competition was a factor, but in healthcare you also have legislation come down that can affect your reimbursement and overall profit. The way we got around that for a time was by scaling and continuing to grow, but there came a time where we had to decide how much we wanted to leverage our own positions and if it would be beneficial to work with a larger group.
What was your greatest accomplishment while owning your business?
I’m most proud of the team we built. Myself, the other owners, our teammates, all of us worked together for a long time, and we kind of grew up with the business. We did the M&A deal in 2013, and the majority of folks who were with us then are still there today. We had a great transition, mostly because we built a lot of trust just by being open, honest and transparent throughout the process. I’m proud that we grew it, did things the right way, and always put our people first.
How did you know it was time to sell?
There wasn’t one defining moment or reason for us to sell. We actually had kept our eyes on that part of the industry for a while, and at the time, we’d noticed a handful of folks doing private equity deals and growing that way. We’ve been in the Chattanooga MSA for some time, and while we didn’t have trouble competing with some of the larger organizations, we did struggle to manage the constant change of scaling our business.
After you open ten clinics, you have to keep expanding to keep up with costs. First you have to open a new clinic every few years, and then that turns into one every year, and eventually you need to open two or three clinics each year to remain profitable. This requires such a high level of change management that we didn’t necessarily have the desire to keep up with. Ultimately it came down to a point where our owners didn’t want to personally guarantee debt anymore and felt it best to look into private equity.
Did you ever consider selling your business on your own?
No, thankfully. We knew enough about the process to see that the due diligence piece alone would be a huge time commitment. We didn’t want to muddle through the process. If we were going to do it, we thought it would be best to work with professionals who could help us focus on what was most important, which was picking a private equity partner that was aligned with what we wanted to do.
What was the biggest challenge you faced when selling NRPT?
I’d say the best and toughest part of the M&A process was really getting down to the studs of our business. You don’t know what you don’t know, which is why it’s great that FourBridges has systems in place to pull the right analytics – and some of those numbers are going to look better than others. I think Andy put it best when he said, “I’m going to tell you how ugly your baby is.” It was challenging to look at some aspects of the business that we probably could have done better with, but still fun to get introspective and ultimately settle on a valuation.
How did FourBridges help you face those challenges?
FourBridges was great because they certainly understood what we wanted and the dynamics of the industry, but also because they were local. When we did struggle or have some questions, we could drive right down to have a meeting. They worked us through everything from different types of buyers like public or private equity backed — or just larger groups — to the labor-intensive process of due diligence.
What was the best part of working with FourBridges?
FourBridges really aligned with our core values going into the sale, the most important of which was open, honest, and transparent communication. They were collaborative, and kept us advised of what was going on the whole time. They walked us through how the whole process would go, prepped us for what each meeting would look like, and handled all of the middleman work of talking to the other party. It was great that they had so much insight, and of course it’s always nice to have someone hold your hand through a confusing process.
What advice would you offer to someone who’s considering selling their business?
My main piece of advice would be that the deal is important but so are the months and years that follow. You need to figure out what you want to do or if you’d like to stick around and keep working with the business. The people you work with and your employees are also going through a big transition too, so you have to lead with honesty and humility and always be upfront with folks. Even though we weren’t exiting the business, Andy and Chris talked a lot about the importance of the transition, and we ran a benefit analysis so we could tell each person exactly what was going to happen as a result of the sale. I just think that type of communication is vitally important.
How are you spending your time now that you’ve sold North River?
In the first few years, nothing really changed. I stayed on and continued to work after we were acquired by ATI, and I did my best to invest in their culture, learn their systems, and get acquainted with our new resource partners and stakeholders. Eventually they started asking me to help them in markets all over the Southeast, Southwest, and now Northwest, and I’ve now worked through about 20 or 30 of these acquisitions with ATI. I think you just continue to find your way like you would in any new environment while keeping the same work ethic, communication, and skill sets that you originally brought to the table. So, I think ATI and North River were a great cultural match, and we’ve really never looked back.