Partners in growth
UroGPO’s David Coury turns to PE firm to fuel growth without sacrificing his culture
What: Founder shifts from strategic buyer to PE firm when selling his urology group purchasing organization
Why it matters: Dynamic business needed more resources to fund growth, but didn’t want to trade its culture for another company’s
David Coury thought he found the perfect strategic buyer to capitalize on his company’s incredible growth. UroGPO, a group purchasing organization for urologists, had multiplied its membership from eight practices in 2013 to more than 500. To climb to the next level of growth and give investors a return on their initial investment, Coury just needed to close the transaction.
However, in the eighth inning of the deal, he hit a major snag.
“We were getting ready to start closing, and there was a shift in culture of what we would have to do moving forward if we were to go work under their umbrella, and it just didn’t feel right,” says Coury, CEO of UroGPO. “The people, the culture, the focus, the ingenuity, and the entrepreneurship that’s inside this company is our success — and it was all about to be stripped with the buyer that I had selected.”
So Coury decided to do something out of the norm. He went back to one of the other bidders, private equity firm Nautic Partners, and finalized a deal with them in late January 2018.
Smart Business Dealmakers talked with Coury about UroGPO’s growth and why it was time to turn to private equity.
Prepare for launch
The idea of reporting to someone else was a strange concept to Coury, who has only ever worked for his father or himself. He had just sold his long-term care pharmacy and started a specialty pharmacy when a group of urologists approached him in 2013 with the idea to start UroGPO.
Wanting to take advantage of a slew of new pharmaceuticals hitting the market, these urologists saw a need to get organized so they could learn how to use emerging medications to treat patients more effectively.
“The timing was really, really right for an organization to get these urologists together,” says Coury, explaining that UroGPO initially launched in response to new prostate cancer medications. Since then, the company has expanded to cover other pharmaceuticals, devices and medical supplies that urologists use to treat myriad conditions.
“To get investors wasn’t the difficult part,” Coury says. “To organize a lot of high-energy, entrepreneurial, strong-minded urologists to move in one direction — that was probably the largest challenge.”
But because UroGPO specialized exclusively in urology, doctors began to jump onboard. The young company found an edge over larger, more diversified Fortune 20 companies like McKesson, Cardinal Health and AmerisourceBergen that also own urology GPOs.
“We weren’t creating a new business,” Coury says. “We were coming into a mature marketplace, but we just focused a little bit better than our competitors. We were able to take the lion’s share of the business from them in just a couple of years. We are by far the largest urology GPO and most likely the largest urology company in the country now.”
Surround yourself with support
In all of Coury’s business transactions, the common factor for success was surrounding himself with great people.
“I don’t think any deal gets done if there’s not a talented team with a plan to carry the business forward,” Coury says. “In each instance, I had a team of people around me that were intelligent, hardworking and knew more about the industry than I did. My job was just to let them run and keep it between the lines.”
To support your internal team during a transaction, Coury says it’s critical to surround yourself with a seasoned team of advisers who can help orchestrate the deal, so your employees can focus on the business. Coury’s advisers included Pepper Hamilton (a Philadelphia-based law firm with experience in health care and in GPO transactions), Harris Williams (an M&A-focused investment bank in Richmond, Virginia) and Pease & Associates, a Cleveland accounting firm.
“The best way to avoid red flags and downfalls is to have professionals around you pointing them out,” Coury says. “If you try to run on your own, you’re going to miss a lot and leave a lot on the table.”
Coury could have easily gotten caught up in the deal with the strategic buyer, but it would have sacrificed the culture that made UroGPO successful in the first place. That’s why he reconsidered and partnered with a private equity firm instead.
“Thankfully, I realized that the culture of who is about to be your partner is as important as anything,” he says. “As we went through the process, all of us felt that Nautic Partners was the best cultural fit for our team.”
In fact, one of Nautic’s first recommendations was reinforcing the UroGPO team to accommodate continued growth, Coury said. “One of the first things they told me was, ‘Build out a staff. You’re running so hard, no wonder you wanted to go the strategic route.’ So, we’re bringing on a full-time CFO, and we’ve hired three people in the last month to round out the company.”
Check your emotions
Coury’s approach to dealmaking has matured with each transaction, as he’s learned not to operate out of fear or anger.
“I learned not to be so reactive to every probing question from prospective buyers,” he says. “If somebody’s about to spend a bunch of money, they’re going to look at the warts as much as they’re going to look at your smile. Don’t get offended. It’s not an emotional thing. When you buy something, you want to know what you’re buying. Keep your emotions in control, look at this as an opportunity and enjoy the process. Be proud of what you’ve accomplished, because somebody wants to buy you for a reason.”
Initially, Coury had hesitations about partnering with a private equity firm because of the stigma that they’d take over. But because he took the extra time to secure a cultural fit, he realized that Nautic wanted to partner with UroGPO so they could add resources to accentuate the business, not take it over.
“I don’t have to necessarily change the way I operate, because that’s what they bought, that’s what they invested in and that’s what they partnered with: with me, this team, and our strategy,” Coury says. “It is a different feel with private equity, but they’re collaborative, they want to help, and they’ve got resources and contacts across the country. Ultimately, I think we knocked it out of the park with Nautic.”
Today, UroGPO has 13 employees and a membership of more than 3,200 urologists in 49 states — representing approximately 60 percent of community-based urologists across the country. Now, with the support of a likeminded private equity partner, UroGPO is positioned to keep growing, never resting on its laurels.
“Complacency will eat you up,” Coury says. “If you’re humming along and you’ve got your customers and you’re not growing or being innovative or coming up with new strategies to stay up with industry norms — if something goes wrong, you’re done. You can’t rest on your laurels just because it worked the last few years. You always have to be forward-thinking, growing the company, because if you get complacent, you run the risk of not being able to dig out.”
How to reach: UroGPO, http://urogpo.us.com/