Continuing its legacy of private ownership, Regent Surgical Health (“Regent”), has successfully sold 100% of its common stock to its employees through the establishment of an employee stock ownership plan (ESOP). The move is a natural evolution for the organization, which started out as an employee-owned company with 14 founders, and has been operating as a small partnership for the past 15 years.
“The owners and investors of Regent considered various strategic financial alternatives as we evaluated the proper ownership transition of the business including the sale of the company to a strategic or financial buyer. We ultimately chose to sell the business to the employees – our true partners – so they can directly participate as owners in the future financial benefits of executing our successful business model,” said co-founder and Chairman Tom Mallon.
Regent CEO Chris Bishop believes establishment of the ESOP sets the company up to better serve both customers and employees. “In an industry marked by massive consolidation, we’ve chosen to retain the ability to best serve our partners as a private company owned by our employees, and not a corporate partner or Wall Street,” he said. “We feel this solution allows us to continue improving our service, refining our processes to best meet our hospital / MD partners needs, and most importantly, empowering our employees to provide the highest quality care to our centers and their patients.”
Regent worked with Cognient Advisors, a Chicago-based ESOP financial advisory and Silvermark Partners, a Nashville based investment banking firm to structure the ESOP.
“We’re very happy with this evolution,” said Matt Lau, Regent’s Chief Financial Officer. “We were able to finance the ESOP through MD partners, friends and Regent management, without professional or Wall Street capital, which gives us several major benefits. First, an ESOP is a tax-deferred investment vehicle, so it frees resources to better serve our partnerships. In addition, as a private company, we retain more flexibility to structure partnerships with health systems than public companies. And, because every employee is now an owner, we think we’ll see higher retention and lower turnover as well as recruiting benefits from the new structure.”
As co-founder of the company, Tom Mallon led Regent’s exploration of ownership options with careful thought to both succession planning for Regent’s founders and maintaining the R.I.S.E. values that are essential to Regent’s culture (Respectful Caring, Integrity, Stewardship and Efficiency.)
“Some of our partners needed liquidity to fund their retirement, so basically we all agreed on the structure of the deal and it was the right time for us internally to do it,“ he said. “If we had waited another year or two, advisors said we might have made more money, but right now was a good time for a fair deal and it was better timing for our existing leaders and for our ASC and hospital partners.”
The timing ensures solid management support with key company leaders remaining active in the company as advisors to CEO Bishop and CFO Lau, including Chairman of the Board Mallon, Chief Development Officer Jeffrey Simmons, and Partner and Co-Founder W. Michael Karnes.
Finally, since learning about it via an internal announcement in late November, employees also have embraced the new structure. In a letter to Mallon, Vianca Bautista, a supervisor within Regent’s Revenue Cycle Management group, had this to say:
“I would like to express my heartfelt gratitude for the opportunity that you have given each and every single person within your Regent family. What you did for us is very commendable, I am at a loss for words with the faith that you have in us. I am sure that it would have been easier for you and the rest of the owners to go a different route. It was very generous of you to make sure “WE”, your Regent family are taken care of and considered at every decision you make. You are the epitome of R.I.S.E. values!”