AHLA's Speaking of Health Law

A Look at Distressed Health Care Transactions

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Jessica Stack, Principal Consultant, TriCurve, speaks with Clare Moylan, Principal, Gibbins Advisors LLC, and Andrea Cunha, Partner, K&L Gates LLP, about how distressed health care transactions are different from other types of transactions and what is driving them. They discuss examples of distressed transactions, the types of buyers involved in these transactions, situations where bankruptcy is an effective tool, and the risks of conducting these transactions outside of bankruptcy. From AHLA’s Business Law and Governance Practice Group. Sponsored by Carnahan Group. 

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Speaker 1:

Support for A HLA comes from Carnahan Group, which is focused on automating the routine and humanizing the extraordinary. Han Group is an innovated healthcare advisory firm that leverages its expertise in technology to drive compliance, improvements, and cost reductions for some of the nation's largest healthcare organizations. Forever , two decades, Carnahan Group has performed complex physician compensation and business valuations, community health needs assessments, strategic consulting plans, and other services within the industry. The company offers specialized strategic solutions that are tailored to the goals of any healthcare organization. For more information, visit carnahan group.com.

Speaker 2:

I'd like to start today by welcoming Andrea Kuya and Claire Moylan to today's podcast. My name is DKA Stack and I am Vice Chair of Education in ALA's Business Law and Governance Practice Group. My consulting practice advisors on finance, valuation and transaction matters. So I'm really looking forward to talking to Andrea and Claire about distressed healthcare transactions. Andrea and Claire presented about this at last year's a HL Aran Healthcare Transactions Conference. Um, so the BLG Practice Group invited them to continue that conversation today. So before we get into it, I'm gonna ask Claire , Andrea, will you each introduce yourselves?

Speaker 3:

Sure. Hi, <laugh> . It's great to be here with you and , um, great to see you again. Um, Andrea. Um, I'm Claire Moylan. I'm a principal and co-founder of Gibbons Advisors. We specialize in middle market healthcare restructuring and consulting. Um, we cover the national practice , um, but we're headquartered in Nashville.

Speaker 2:

Hi. Um, thanks Jessica and Claire. Always great to see you again and work with you. Um, my name's Andrea Kya . I'm a partner at k and l Gates. Um, I do healthcare mergers and acquisitions, but am a recovering bankruptcy attorney. So constantly find myself in this mix between distress healthcare transactions. Great. Welcome. Um, so just to kick it off, we're talking about distress transactions. So just to sort of lay the foundation , um, can you expand on what you mean when you say distress transaction and maybe give a couple examples?

Speaker 3:

Yeah, sure. I'll take that one. Um, so when we're talking about distressed transactions , um, hopefully it's not the people in distress, though many times the people are in distress, <laugh> . Um, we're talking about the businesses being in distress. Um, in a bankruptcy scenario that's pretty obvious. You know, you've got a , a business that's failed and it's going through a bankruptcy process and a transaction. Um, most of the time from what we've experienced, a transactions part of that, it's section 360 3 sale or other. Um, but outside of the bankruptcy court , um, there are other sales , uh, other transactions that take place. Um, in cases where you might have a shortage of liquidity, you might have , uh, the equity completely wiped out by debt. Um, so it's different dynamic there when you're trying to sell the business where you've got different stakeholders involved. Um, a transaction in, in my mind also includes when it's not necessarily a sale of assets, but it could be a settlement of claims or liabilities that enable the business to continue without those liabilities moving forward. And the type of buyers and , um, and players in a distressed transaction are typically a little different than what you'll find in a , a strong performing business. The market is a little different. There's still a structured process , um, but the, the lenders, the people that lend into a distressed sit situation, the buyers that are attracted to distressed businesses can be a little different. So , um, when we're talking about distressed transactions, we're talking about those types of things. Shortage of liquidity , um, where there's no equity left where you're in bankruptcy. And , um, and the , the stakeholders , um, and the players involved are a little different that help you get to get to the solution and get something over the line.

Speaker 2:

Got it. And I think in the presentation you gave last year, you talked about the increase in this activity. Um, can you expand on what you think is driving the distress in healthcare?

Speaker 3:

Yeah, I will. Um, so what we're talking about today , um, is more on the healthcare services businesses , um, more so than other aspects of healthcare like pharmacy , um, and , um, and medical equipment. If we focus more on the healthcare services businesses like hospitals, nursing homes, senior living, hospice, home healthcare , um, those types of businesses, the drivers , um, are numerous. And it's a very difficult market at the moment , um, for providers and, and everybody actually. Um, that said, it's not all doom and gloom. There are , um, changes and whenever there's big changes in a sector, there's opportunities for some and there are headwinds for others. Um, but I'll just go through some quickly 'cause we could spend a whole hour talking about this <laugh> . Um, yeah , so on the capital market side, the interest rate environments made things very difficult. Not only affecting cash flow when you've got the floating rate exposure, but also valuations and ability to get financing for a transaction. Um, the thresholds have got more difficult in this interest rate environment. There might be hope on the horizon in the second half of 2024, what people are expecting. Um , but for now it's a , it's a tough environment. Um, there's been fewer m and a deals as well, and we'll maybe come back to that. Um, there's increased , um, antitrust emphasis. So that's put , um, another layer of , um, of potential barriers for some strategic large strategic transactions. Um, labor and cost supply . Supply cost pressures have been massive the past few years. Um, that's going to continue , um, maybe not increasing at the same rates as it did through , um, the backend of, of the pandemic, but it's definitely set a new baseline. It's not going to get cheaper. It might just slow down getting more expensive. Um, but on the other side, on the revenue side, the , the rates haven't gone up at the same rate as the cost . So there's a margin squeeze. And I think there's a big question in everyone's mind and maybe a realization that the margins that you could get in healthcare pre covid may be gone forever. It may be just the margins are, are lower , um, for the foreseeable future. And that impacts businesses when they've got a , a capital structure and a debt structure that's based on expected returns that maybe you just won't be able to get anymore . Um, other aspects , um, on drivers, I don't, I haven't seen this play out yet, but I think it's something to watch is the unwinding of Medicaid continuous enrollment. So through the pandemic , um, the government allowed people to stay on Medicaid if they qualified for Medicaid and not have to re-enroll, but through 2023 from May, that was unwound. So every state is going through a process of everybody having to re-enroll in Medicaid. And already as of the middle of January , um, 15 million people were dis-enrolled from Medicaid because they no longer qualified. So the impact of that on providers , um, I think will start to see this year. It won't happen immediately, but as those people need healthcare , and then if they're not insured with Medicaid and they don't have other insurance , um, that'll start to pinch. It's a , it's a massive number and every state's not impacted the same. Some states are more , uh, impacted by that than others. Um, and then the last thing is the macroeconomic shift, which has been coming for as long as I've been in healthcare about 20 years. Um, moving out of hospital and out of an institutional setting into a community-based setting. And the pandemic really helped to accelerate that. But businesses that haven't , um, transformed their care to be able to take advantage of that trend. And they're left with a legacy infrastructure that's not fit for purpose, that's bigger than what they need, and that's expensive to , um, keep in good order, they're really going to continue to suffer. On the other side though, there's the opportunity of who's getting that business. So ambulatory surgery centers and, and others that have got that model , um, that that's where the care is moving to. Um, so there's opportunity at the same time in the same token as we talk about challenges.

Speaker 2:

Got it. Okay. So there's a lot going on that's pushing people to sell or do a transaction. Um, and in that there's a subset that are truly distressed when they enter that process. So they didn't , they need to jump on the first wave or get into it early. Um, so Andrea, I'm gonna turn over to you for a moment. And can you talk about what makes the distress transaction different than one might enter into the transaction space for some of these reasons, but in a different way because it's what we're calling distress today. Right. And as Claire mentioned, I usually, when you have a distressed company, you have a company that's facing liquidity issues. They may be having problems making payroll , um, they've probably delayed payments to unsecured creditors. Um, they're probably negotiating with their lenders. There's a lot usually going on at the company where funds are needed. Um, and as Claire just mentioned as well, access to cash is not as easy these days. So , um, you really have this tight timeline of can we make this company work? Um, and if so, you know, finding a buyer on this compressed timeline. So usually that is difficult on the seller side because they're forced to find a buyer quickly or a strategic partner quickly negotiate with lenders and, and they're trying to also operate a business. Right? But you also have the pressure on a buyer to be able to come in due diligence quickly. Usually they're, they're essentially stepping into the company. So a lot of these are stock deals or , um, it's a little more difficult in healthcare to do an asset transaction outta bankruptcy , um, with payer agreements and , and non liability of certain contracts. So you see a lot of them being stock transactions , um, merger agreements. And so you're essentially stepping into all of the liabilities of a company and you have this tight timeline to due diligence to figure out what are those risks, what are you stepping into, what are you inheriting? Um, and trying to build all of that into a purchase price for a value proposition of, you know, what are you going to assume as liabilities? What are you paying in cash? Um, who are the different constituents that you're negotiating with? Is there lender debt? If so , um, if they can't be paid in full, is the lender taking a haircut? If so, you know, what are they willing to do? A lot of the times, and we've seen recently, lenders being more proactive and more involved in these negotiations, oftentimes even replacing entire boards. Um, so you're trying to figure out who you're negotiating with , um, and you're also trying to figure out what you're pricing this, you know, proposition for, for this acquisition, but on a very tight timeline where you don't really have recourse. So you have a company that's failing. You would typically do things like have indemnification, you'd potentially have escrows to backstop reps and warranties. Usually in these situations you get very minimal reps and warranties. Um, you're stepping into whatever you're stepping in, you just need to figure out what that is and you need to figure it out quickly. Um, and you don't typically have the escrows , um, that you would normally have for a year or two to back your up some warranties. So it really puts a lot of pressure on the buyer and the buyer's advisors to be able to determine what is going on with this company very quickly. What are the biggest risks, how exactly if there are risks, do we mitigate them? Um, especially in healthcare where you had , you know, potentially healthcare fraud and other things that carry over , um, with Medicare and payer agreements and billing audits, you don't, don't have time typically to do billing audits and coding audits. Um, so it's just a matter of really relying on your advisors to determine what those risks are, making sure you're not stepping into something that you haven't built into the price that you're paying for this company.

Speaker 3:

I think as well , um, the healthcare overlay on all of, I agree with everything that, that Andrea was saying, but when you've also got the healthcare overlay, it's not like we've got a , a factory where the product just stays in the factory while we sort out the transaction. Um, it's, it's a people business. You've got physicians, you've got patients, and you've got staff and those PE people have choices and they can go elsewhere. Um, and the community in , in a lot of the hospital cases, we , um, we have, have a massive interest in wanting to see what's the future of that, that hospital. Um, so while you've got the, the transaction logistics to manage as well on getting the , the buyer lined up , um, on the, on the seller side , um, you've gotta also keep everything , um, held together to actually make it through to a transaction without losing your physicians, losing your key staff members, losing your , um, your key people in the leadership team, patients deciding to go elsewhere. Um, so there's a whole stakeholder engagement , um, aspect of, of healthcare , um, which I think is a bit different to other types of sectors when you're dealing with distressed transactions.

Speaker 2:

Of course, for sure. Um, and are there any examples that you wanna share where you address some of these risks? We don't have to cover all of them , hopefully not every transaction you do has the whole laundry list of distress. Um , but are there any maybe within the past year or two that you've seen that you wanna speak about? Yeah, so , um, there's definitely always risks , uh, that come in these transactions. And there's always the fear of the unknown, but then there's also the known, right? And there's the things of how do you mitigate the known. And so we had a company who was doing really well during covid , um, as a lot of companies did, and ended up distributing out to all of their investors a significant amount of cash, not keeping reserves. And then a year later, suddenly financial difficulties hit , um, with all the market conditions Claire is talking about. And the company immediately went into distress, immediately went into marketing for a quick sale. And one of the biggest issues was this had to be a merger transaction, so stepping into all the liabilities, and there was a lot of concern on the buyer side of, you know, what is that the risk for the directors and officers, because that risk is essentially being inherited. And when you're wiping out equity in a merger transaction and they're getting minimal amounts back, a lot of the times stockholders can just become litigious. And this was a very significant cap table, a lot of stockholders, a lot of , um, well off stockholders who had those funds. So we didn't want, as a buyer representing the buyer for them to step into that liability of, you know, immediately a director and officer liability suit with the DNO policy that had bankruptcy exclusions. Um, we were trying to do this outside of bankruptcy, so we were trying to, you know, keep the, the policy in place by a tail policy, but also had to go out and get releases from every single director and officer , um, which is not an easy thing to do when they are very concerned about their own liability as well, and the decision making they did. But we ended up getting all of the releases. Our client was very clear they were not buying this company without them. Um, and then the company ended up reserving funds and purchasing an extra tail policy , um, to cover them . But, you know, as a buyer, we just couldn't walk into potentially, you know, a hundred million dollar liability of funds that were distributed. So that was probably one of the bigger ones. <laugh> .

Speaker 3:

Yeah, right. Gosh, I've got some other , um, examples of risks that we've kind of learned from , um, and will we'll make sure we incorporate in our , um, in our future , um, businesses , uh, future transactions. So one of the cases we did , um, was a , a business that was , um, on the brink of closing , um, pre-bankruptcy. So it was a , a bit of a free fall filing. Um, the, the CEO had died, and then the incoming CEO , um, which was his wife died of , um, COVID shortly after. I mean, it was a terrible situation. And , um, so we got a appointed as the financial advisor for the debtor, and , um, ran a quick process to have a bankruptcy auction. The auction was successful and , um, and there was a winner, but the winner just disappeared days after the transaction couldn't be contacted, was obviously not going to , um, come through with the deal that they had agreed to , um, at the auction. So fortunately we did have a backup bidder, which is, which is pretty typical. So I just wanna make sure everybody, make sure you have your backup bidder because you can't be relying on the, the first bidder. Um, and , um, and in healthcare you don't close the transaction immediately after having the auction because there's all of the transfers of licenses and , um, and all those agreements, which can take months, even years to, to have that all , um, go through the government process. So , um, what ended up happening in this case is that it was nine months down the road before it was due to close , and the business continued to lose money. It was losing money before the transaction. The buyer was aware of that, it continued to lose money, and maybe they didn't do the due diligence like , um, like Andrea would recommend, and , um, it was losing more money than they expected. So by the time it comes to closing on the transaction, they wanna retrade, you know, they think, well, I'm not paying the same amount that I committed to nine months ago. This is a disaster company, and I don't, I don't think it's worth it that anymore. Well, nine months down the road, the third and fourth bidders, they're long gone. You know, they've moved on to other things and they're not in the market necessarily for this anymore. And plus the business is not doing well, so maybe they're not even interested. So then you're facing , uh, uh, dealing with one party and , and trying to negotiate with one party and one buyer, and you know, what the balance of power is, they're very difficult to try and get something over the line when you've only got one person interested in the , in the assets. So it happens frequently , um, particularly in the type of , um, um, in the middle market where you don't have always the most attractive assets coming through and, and people aren't jumping at <laugh> , they're not lining up to buy some of these assets. You've got part , you've got parties that are , um, have a unique interest in it, and for some reason, you know , they've got the ability to make it work, whereas not everybody can. So the retrade risk is something that's, that's very real and it makes an enormous difference , um, for the outcome of the case. So trying to design the process so that you've got a competitive process and you , um, takes steps to tie in the buyer and, and get deposits and, and have them , um, really committed to the, to the deal , um, to mitigate that ability for them to retrade down the line is , um, is something that I'd really recommend.

Speaker 2:

Well , we're talking about bids and the types of buyers you mentioned , um, some buyers have that specific interest, which is why they're willing to take on some of these risks or enter into this distress. Is there any particular group or different characteristics of buyers that you see , um, to be, whether it's typical or maybe in the current market willing to enter? Um, or is it really case specific based on the , um, what's for sale? Like , I don't know , Claire , if you wanna orient Andrea <laugh> , take a swing on what you're saying .

Speaker 3:

Are there typical buyers? That's the question. Are

Speaker 2:

You seeing like a consistent buyer type is I guess one way you could look at it? Or are there certain characteristics across the different fire types that are entering?

Speaker 3:

Um, It , it depends what the type of the asset and whether the assets a potential , um, platform , um, deal for someone or it's something that they can easily bolt on to an existing platform. Um, if we take the example of a a community hospital , um, the strategic, the strategic buyers are going to be larger regional systems , um, but the hospitals aren't always bought by strategic buyers. Um, we had a case , uh, last year or the year before where it was a community hospital that couldn't make ends meet, and all of the strategic buyers in the market were interested, but they wanted to close inpatient services and create a new outpatient facility for this community. And the community didn't want that. They really wanted to have inpatient services, so they ended up , um, agreeing to sell the hospital to a non-strategic buyer . And , um, and that enabled them to, to keep the inpatient services. But you don't have that kind of hub and spoke , um, model happening in that market. I'm still not convinced whether that that will , um, not still end up happening one day. Um, but for the time being, that was the solution that that was , um, the community wanted at that time. So, so you always think it's gonna be a strategic buyer because they can make more out of it than a non-strategic buyer, but it , it's not always the case that, that the strategics win.

Speaker 2:

Interesting. Yeah, I think that that's what makes healthcare transactions, you know, unique, especially in those community situations where you have these other third parties where , um, you know, you have community healthcare services you're providing to them, right? So that's very personal to a community. Um, and that personal, you know, community feel versus what financially makes sense don't always align. So, you know, closing OB services is always a big dispute in these hospitals because it's very expensive. It's one of their highest, you know, liabilities and, you know, people wanna give birth in their community and they want those services available. But, you know, when hospitals are considering, you know, all the financial economics that Claire was discussing and, you know, determining where to cut costs , um, sometimes it's cutting lines of service that people in the community really want. It's really hard to find a buyer , um, who can figure out and do exactly what that buyer did , which is keep all the services in place , um, but also keep the facility opening and running. And we'll see, I guess how that works out long term . Like Claire said , um, obviously cutting physician compensation obvious is also on the top of the list of heavily negotiated things. Um, so it , it definitely makes healthcare unique compared to other , um, service line . Yeah. I'm gonna shift gears a little bit. Um, we've talked from the beginning about different financial stresses. Um, in what cases or examples, where have you seen bankruptcy , um, as the solution or an effective tool rather, to ultimately have the best outcome for the situation at hand?

Speaker 3:

Um , I'll take that one. There's , um, there's a case that , um, we , um, we weren't on the debtor or the, or the credit aside. Um, in this case we had a little bit of an involvement, but, but , um, I watched from afar and was pleased to see the outcome . So the case , um, is Borrego Community Health Foundation in California. That company had a , um, a historical , um, fraud and they changed their board and they had taken measures to , um, to prevent it from happening. Um, but there were still issues for , for some reason. Um, the department of , um, health and care services in California decided to suspend payments of Medi-Cal for Medi-Cal, and this provider is a nonprofit and primarily served a Medicaid population. So cutting those payments would mean an immediate closure of the, of the whole operation, which was pretty sizable and served a rural community. Um, so in that case, the , um, the debtor filed bankruptcy and was able to use the bankruptcy process and the automatic stay , um, to , um, to stop the suspension of those , um, Medi-Cal payments. And the reason I chose this one to talk about is because they , um, have just , um, submitted the plan and I think agreed the plan in January this year , um, which , um, solidified, you know, they had a , a very successful sale. Um, they were able to settle the claims with the Department of Health and care services, pay all the secured creditors, and also , um, have a plan which would provide for a 100% return to general unsecured. So that's a , um, incredible outcome , um, for a community that really needed these essential services , um, essential healthcare services for a rural and very , um, low socioeconomic community. And if that hadn't happened, the outcome would've been closure and , and a scrambling to try and , um, find other providers to , to deliver those services. And at the time, the analysis was that they just weren't, they weren't providers in the market to be able to do it. So that in that case, the automatic stay in bankruptcy and the ability to use the , the jurisdiction of the bankruptcy court to have as the forum for dealing with the government liabilities was , uh, extremely effective. And I think the, the , the outcome for patients and for , um, for that business at , at this stage looks extremely positive. Can you think of any other examples, Andrea, where bankruptcies been an effective tool in your experience?

Speaker 2:

Yeah, so the biggest thing for healthcare is the , the nons assignability of payer contracts. And now there's essentially this evolving case law out of Delaware that is essentially saying, not only can you force the assignment of these payer contracts , um, which we've all assumed is, you know, you're taking all of the liabilities, especially with Medicare and with companies that, you know, especially the lab business, you know, had a , a lot of closures because a lot of the fraud and , and people couldn't take over those businesses because they, they couldn't take those payer contracts. And so a lot of the times if there's, you know, historical billing issues , um, you have a facility's that risk because you , no one's gonna step into those Medicare liabilities. And Medicare historically has not been willing to negotiate those. And so now you have this, this case law coming out that's saying, well, we don't think that this is an executory contract where you actually have to essentially cure, which is pay whatever liabilities are on that contract to assign it , um, or step into that liability. But we think that these are actually statutory entitlements. And so in that case, these are just assets that can be sold like any other assets. And so you don't have to cure those liabilities. So essentially you're taking a Medicare agreement , um, and you aren't taking on those liabilities, which for a lot of facilities has been a huge issue. And, you know, I was in-house at a company, I filed bankruptcy , um, and that was, that was the biggest problem. Nobody was going to take over the healthcare company with the liabilities that they had with their payers. Um, and had they , had they been able to take over those contracts free and clear, without those liabilities , um, those facilities would still be open. And if they're not using the bankruptcy process , um, are there other options or what risks would there be if these similar sellers weren't going through that process if they tried to do their transaction without those protections? Yeah. And , and so that, that adds some risks , right? Bankruptcy gives you a lot of finality. Um, it , it allows you to have an order that says these things are free and clear. You know exactly what the cure amounts, if you're taking over certain executory contracts , um, you mostly know the liabilities have been disclosed , uh, so you have a lot more information, a lot more guarantees. And then you have a sale order that says you've now purchased these assets free and clear based upon the purchase price, and those proceeds will attach , um, the liens will attach to the proceeds of the sale, so that that is not something you're gonna get outside of bankruptcy. Um, and so you have to figure out exactly what those liabilities are. Um, and you're also buying a company most likely at a depressed price because it's, you know, distressed and you have a lot of creditors that might not get paid , um, unhappy shareholders who aren't getting paid. Uh, so you have fraudulent transfer risk . And so trying to determine what that proper purchase price is , um, knowing that that is a potential issue of unhappy constituents at the end of the day, at the end of this transaction when you close and not stepping into those liabilities is one of the biggest issues. And so a lot of the times you don't have time for a fair market value opinion. You have to do the best you can to document what that value is. Um, a lot of the times we get either a broker price opinion, we get some type of opinion from essentially a banker on the marketing process, how those assets were marketed, who they were marketed to , um, the timeframe from which they were marketed. Uh, and you just have to do the best you can to mitigate that fraudulent transfer risk. If somebody comes in and says, we think that you did not pay enough for this company , um, you underpaid for these assets, or, you know, the , the stock that you bought for this company , um, and mitigate those risks. And we, we've seen a lot of people becoming more litigious about that , uh, with buyers and these, you know, essentially fire sales , um, for lack of a better word,

Speaker 3:

When time, like it must be hard , um, Andre , because when time is of the essence, you know, you've got liquidity and you're just trying to make it over the line to a transaction, the , the choice might be, you know, you take the deal that's in front of you or the place closes, and then after the fact having a challenge that says, oh, well you didn't get fair value, and you think, well, the conditions really didn't provide the time for a very robust marketing. I mean, no one was willing to fund the transaction process, the marketing process to actually have that happen. So pretty challenging, I guess, to prove when you've , um, got a whole lot of , um, stuff flying in the air and you're just trying to get something over the line ,

Speaker 2:

Right? And you don't always have a market for those assets, right? So, you know, sometimes they've been marketed, sometimes there was no time to market them. Um , yeah , sometimes we try to slow down the transaction. They have had clients who are willing to, you know, essentially pay an option fee, a couple million dollars to allow the business to continue to operate. So we could at least do some form of diligence in a couple of weeks that is, you know, not perfect, but at least some diligence. Um, and if , if they decide to walk away, they just assume that that's a fee for, you know, looking at the business. Um, and sometimes you have to do that because you need, you know, especially if you have very litigious stockholders or creditors who are being wiped out, you need something, you need a fairness opinion, you need something to show that you're , what you're paying is the right value, even if there is nobody else, it's hard to prove a negative, right? So you need somebody else to come in and be able to provide that to you otherwise, you know, you're essentially just walking into litigation.

Speaker 3:

Yeah, it's difficult because you can have a piece of paper that says what a value is, but the market really talks. One of the things that we often do when , um, we're faced with a , you know, business is losing money and there's an offer on the table, but you think, okay, well how, how much is it going to cost for us to run a 60 day process and are the losses , um, that need to be funded going to be covered by the potential for getting more money <laugh> if we run a robust process, versus just taking the offer that's in front of our face right now and doing the deal. Um, so it depends on the operating losses and if anybody's willing to fund them if they're out of cash.

Speaker 2:

Yeah, I mean , just coming back to that compressed timeline and imagining any buyer without the time to really dig in and do that diligence, whatever offer they put in place, they're trying to even , you know, it doesn't matter how well intended they are, they're looking at all of their risks and to the extent that they can do diligence or not. Um, so I imagine that while they might put in as many caveats as they can, whether it's starting with an option or trying to figure out , um, some kind of tiered transaction or , um, I know healthcare has a little bit of struggle with option models inside that purchase price. Um, yeah, it's just a lot <laugh> pressure for everyone right, on these deals. Um, it's been really interesting to follow this conversation through that distress transaction and all these different risks. Um, I especially appreciated examples that you brought up because it helps really see specific scenarios and what , um, individual sellers and buyers did when they were in that difficult position. Mm-Hmm. <affirmative> , is there anything else, any other examples you wanna share or anything you wanted to maybe you thought about saying and , um, wanna come back to before we wrap up?

Speaker 3:

I , I think I'll say something that , um, what I've found is that, you know, you think that you're dealing with rational players on all sides. You know, people will make decisions in their own economic interests, and so you can do some analysis based on that. Um, but there's, there's always a curve ball , you know, <laugh> , no one, no one just looks at the numbers on the page and, and, you know, and acts, there's the emotions, there's the historical relationships. They may have other reasons for wanting, you know, a certain outcome that might not be the most economically advantageous. Um, so yeah , it reminds me of , um, that, that , um, Tom Cruise and Jerry McGuire , when, you know, you've got a client and you're like, help me help you <laugh> , help me help you, you know , um, you want them to act in their rational interest, but they don't always , and that's on all sides. So it means trying to get things over the line sometimes. Um, you know , we'd recently had a case where it looked like it was lined up for a , um, a good settlement and one of the parties just came to the, to negotiation with, with the curve ball and threw , blew the whole thing up. Um, and there was really no , um, rational reason to do that. It was, they'd had, you know , just years and years of acrimony with the other party and they just couldn't help themselves <laugh>. So that type of thing happens all the time. Um, and , uh, so when you know you do get the transaction over the line and it's successful and you can have the business , um, go on, its merry way, it, it is really satisfying. But there's a , that's why it's a bit of a wild ride, don't you think , um, Andrea,

Speaker 2:

Yes, absolutely. Completely agree with Claire . Um, you , you think you know what you're walking into , but in these situations yeah, emotions tend to run high and, and convincing people of the right thing versus , um, you know, what they feel is , is , could be difficult for sure, <laugh> . Definitely . Alright , well thank you guys. Thank you both Claire and Andrea for sharing your expertise. Um, if the listeners wanna get in touch with you, is there a preferred way you'd like them to reach out?

Speaker 3:

Sure. Um, our website, it's Gibbons, G-I-B-B-I-N-S advisors . And our con contact information is there , um, myself and Ron Winters, we the principal. So reach out to either of us, would be delighted to speak to you.

Speaker 2:

Yeah . And Andrea , um, yeah, you can reach us at um, kl gates.com or on LinkedIn. Um, all of the phone numbers ringed my cell phone , so it's pretty easy to get ahold of us . Awesome. And you can find the business law and a governance practice group for the A HLA communities where there's lots of conversations and activities happening there as well. Um, yeah, so thanks again. It's been a pleasure .

Speaker 3:

Thank you so much ,

Speaker 2:

Jessica . Thanks Claire .

Speaker 1:

Thank you for listening. If you enjoyed this episode, be sure to subscribe to a HLA, speaking of health law wherever you get your podcasts. To learn more about AHLA and the educational resources available to the health law community, visit American Health Law.