When Hans Smit became director of Actief Zorg, the business had revenues of 4 million euros, but also hefty debts. He knew: growth is the only way to survive. Twelve years later and some twenty acquisitions later, the commercial healthcare provider is in core health and good for 150 million in revenue. 'The nice thing about growth is that it gives a lot of dynamics in your business.'
'Growth through acquisitions is a lot harder than organic growth,' Smit says at Actief Zorg's headquarters in Waalwijk. 'You have to deal with cultural aspects, other ways of working, other IT systems ... And yet we choose to do it.' To understand that, he outlines the healthcare market. Domestic help is financed by municipalities through the WMO. 'There are market forces there. If you do a good job, you get more assignments. In this market, we grow mainly autonomously.'
There is also the V&V market: nurses and caretakers who provide care in people's homes, for example wound care after hospitalization. This is financed through health insurers. 'Every year you are allocated a certain budget. So you are not dependent on a client who is satisfied or not, but on whether the health insurance company likes you. Autonomous growth is almost impossible here, which is why we do it through acquisitions.'
Growth is essential, Smit explains. 'Margins are only 3 to 4 percent in this market. If you want to stay over the end, you have to have enough volume. Many small companies are falling over because they have relatively high overhead costs.'
Synergy
Actief Zorg has made some twenty acquisitions since 2010, half of them from bankruptcies. 'I am approached every week or so. Usually we say no. Often they are small businesses with revenue under a million. It takes a lot of time to integrate them while the added value is low. From a million on it can be interesting. The most important thing is that they are active in the V&V market and that there are contracts with health insurers behind them, because that's where we get our growth from. But also: are they in a region where we want to grow?
I sit here seemingly relaxed, but that is outside. Managing such a business and growth is not so easy. I have a lot of stress from it
With smaller acquisitions, profitability is not so important. 'If we can make such a business profitable quickly enough, then it is interesting for us. With a large deal, starting at about 3 million euros in revenue, it's different. We don't integrate that kind of business right away, but gradually. Otherwise it requires too much management attention. That means that we do not yet realize synergy immediately and that such a business must be able to continue to operate stand-alone for a few years.
The synergy is not so much in costs, but mainly in revenues. 'The bigger you are, the higher the rates you can negotiate with insurers. On the cost side, we may be able to reduce overhead from 18 to 17%, but 20% higher hourly rates really add up.'
Bargain
Acquired parties in the V&V market are often foundations and the way of thinking of a director is different from that of an entrepreneur, notes Smit, who tells his story in an infectious manner. "We once offered a million on a healthcare company with 13 million in revenue and a healthy return. The seller saw at the last minute that there was another million in the bank; we had gotten it almost for free. We ended up buying it for 1.6 million, a net six tons. In the land of the blind, the one-eyed is king, haha.' For the record: it's not all bargains. He also sometimes pays more than he likes.
Smit - originally an econometrician - does the valuation and negotiations himself. He outsources the due diligence to his accountant, and for the paperwork he has a regular law firm. For a larger takeover, he spends between 50,000 and 100,000 euros on advisory costs. 'It's part of the deal. We include those costs in our return calculation.'' Active Care always pays the purchase price from its own resources, only the working capital is financed at the bank.
Customized
Each acquisition is customized and he learns from each one. Like the time there was a hassle about vacation days. 'Some employees still had days outstanding, others had taken too many. Those days had been netted. That's not allowed, because some no longer worked there. That led to a claim of several tons. Eventually we recovered that through a lawsuit.'
With six thousand employees, twenty branches spread across eight provinces and 150 million euros in revenue, Smit and his two fellow directors bear a heavy responsibility. 'I sit here seemingly relaxed, but that is outside. Managing such a business and growth is not that easy. It stresses me a lot. That's why we let big acquisitions go ahead standalone first. Sometimes we make a mistake. Then the management turns out not to be suitable and we put in management from this side to speed up the integration.'
Smit has learned from it: from now on, he always talks to the management layer below the owner beforehand. If that is not possible, the deal is off.
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