In 1970, a dead 8-ton sperm whale washed up on the beach in Florence, Oregon.
Let it rot? That will take a few years. Not be good for tourism or down-wind real estate values.
Bury it? Decomposing gases from something that large means it wouldn’t stay buried, which means that is essentially Option One, but with a big bulldozer bill.
Chop it up? No one had a really big chainsaw.
The final answer was to blow it up and let the scavengers eat the pieces.
Boys will never pass on a chance to light some dynamite. But how much do you need to disintegrate 16,000 pounds? A military veteran with explosives experience suggested 20 sticks.
But testosterone was involved.
‘Nah, 20 cases would be better.’ Half a ton of dynamite.
Next question: how far back should we move the onlookers? Quarter mile should be more than enough.
You know this is about to get good, don’t you?
The massive blast was enjoyed by all…that is, all except the guy whose car – a ‘safe’ quarter mile away – was flattened by a flying giant piece of blubber.
Fortunately, no one was hurt. Unfortunately, but for the car crusher piece of flesh most of the animal didn’t budge. Half a ton of dynamite moved a lot of sand, but not a lot of whale.
Eventually the bulldozers were called, and the burying option turned out to be the right plan after all.
Mostly, I just wanted an excuse to tell that hilarious story, but there is a point.
When physicians sell their practice to a financial sponsor and roll part of the proceeds forward as equity in the go-forward company, they become vested in the strategy to make that equity more valuable over time.
Breaking news…not every plan the guys in blue blazers with cash dream up is a good one. Sometimes, there is a lot of loud noise, but when the dust settles, things are about what they were before, only with a hole in the ground.
My opinion, for what it is worth, is one of the things that gets equity sponsors in trouble – those who don’t know healthcare very well – is believing that a strategy that worked in one specialty will work in every other specialty. They go to a conference, hear a success story, and say, ‘Let’s do that.’
But that was in dermatology and you have bought a bunch of OB/GYN practices.
The creation of future value in the roll-up of physician practices depends on a lot of things – culture fit, execution, sharing leadership between clinicians and business types, a million things.
But strategy – what are we trying to do – is at the top of the list and can be discussed before you do the deal. Make sure it makes sense.
Just lighting a bunch of explosives – or in our case, buying a lot of practices – is not going to make your rolled equity worth more three to five years from now.