The Challenge
A large public owner of hospitals signed a Letter of Intent (LOI) to acquire multiple hospitals and a number of separate legal entities from a large not-for-profit hospital operator. The LOI was signed in September, and the deal was expected to close by the end of the year. However, the buyer did not have the internal resources to perform due diligence and calculate the preliminary net working capital (PNWC).

SHP Approach
A Partner with Spectrum Health Partners (SHP) was engaged by the buyer to perform due diligence and complete a number of special projects associated with this acquisition. The Partner assembled a team of experts to manage the due diligence process and ensure the transaction closed within the target timeframe. Specifically, the firm was engaged to deliver the following prior to the close:

• Calculate Preliminary Net Working Capital (PNWC)
• Review and report on the system on Internal Control.
• Review all contracts and calculate the value of unfavorable contracts assumed in the transaction.
  The transaction was consummated by the end of the year and prior to the following year's first quarter end, SHP was engaged to deliver the following:
• Calculate Final Net Working Capital (FNWC)
• Develop Opening Balance Sheets for all entities acquired.
• Assist with the integration (financial and operational) of the new acquisition.
• Work with both buyer and seller in agreeing to the final settlement.

SHP Solution
At the conclusion of due diligence, it was determined that the client was acquiring 24 separate legal entities. The firm reported on each entity and assisted the client in determining the best approach for consolidating all entities into 10 separate legal entities.
Separate reports with executive summaries were prepared describing each entity acquired. A spreadsheet was created consolidating the 24 entities and establishing the groundwork for the development of the opening balance sheets. SHP development and execution of a very thorough and well thought out due diligence model was the key of this success.

The Results
The acquisition was integrated in the first quarter and immediately produced positive results. The firm efficiently calculated PNWC and FNWC which enabled the hospitals' finance staffs to concentrate their efforts on strengthening their individual operations. The total value of the transaction was valued in excess of $150M, including Net Working Capital. The final settlement amount equaled $31K. Final settlement was achieved by the end of the third quarter after financial and legal reviews were completed.