Letter from TBT Member, Stacey Kottman, Co-founder and CEO of Medicat

Dear Fellow Members:

Robin & I are pleased to share that our ownership interest in Medicat, LLC was acquired by Banyan Software, Inc. in early November. In hope that it might be helpful to some of you, we are pleased to share a few thoughts and reflections on this milestone event in our lives.

Banyan Software was formed in 2016 by David Berkal, Medicat’s new CEO, to identify and acquire a company like Medicat. We were not actively seeking to exit when David contacted me early this summer. Once we validated Banyan’s long-term investment horizon, which is quite unique, we asked ourselves this question: Would Medicat’s future be brighter under Banyan ownership than our own? After some candid introspection, we decided the answer was ‘yes’ for three reasons.
· Banyan’s investors/board include a number of successful software entrepreneurs that offer a network, a technology specific ‘brain trust,’ available for the benefit of Medicat.
· Banyan has deep pockets in the event an opportunity arises that requires significant capital.
· Having invested all available cash in Medicat since our 2005 acquisition of a failing company, being 58 years old, we would need to start diverting future cash toward retirement instead of investing in the company. We are pleased to avoid that conflict of financial interest.

In short, we’ve had a good run, but are not too proud to admit that Medicat’s future could be brighter under Banyans’ ownership : )

Motivated in part by our participation in the TBT, Robin (CFO) & I intentionally set about reorganizing the company two years ago to largely remove ourselves from day-to-day operations. The goal was to assume the role of ‘active shareholders’ – to ‘work on, not in’ the company. In our opinion, having largely achieved that goal was a major value point for a prospective buyer like Banyan. Additionally, though we will be engaged as consultants for a period to ensure a smooth transition, being able to truly exit from day-to-day decisions and responsibilities after the Close was a major emotional plus for Robin & me.

Over this past year, Medicat was:
· Investing in a launch of a new service to our Education market that this market has not seen before.*
· Investing in SaaS reliability & SOC II HiTrust certifications unheard of among our competitors.
· In the midst of an intentional effort to change the company culture.**

Of course, a couple of these factors would send a typical investor running for the hills : -) However, Banyan saw value in our commitment to client service resulting in market leadership, high retention & solid recurrent revenue. They also recognized our investments in the future – in product technology, reliability, security and organization – as value added.

Why Now?

Everything else being equal, if we had 3 more years to see these initiatives to success, Medicat would have commanded a higher valuation. But nothing else is ever equal over time. I wasn’t willing to wager that 3 years from now the stock market would still be setting new highs due to a continued economic expansion, interest rates would remain at record lows, the M&A cycle continue its fevered pitch, and that domestic & international politics would remain stable (if you call what we have today stable : )

In short, we could have done everything perfectly, resulting in accelerated revenue growth & and a more appealing bottom line. But for reasons beyond our control there might not be any buyers in 3 years – or if so, at a reduced valuation (ie. dot.com bubble). In short, at our stage in life, we took the ‘bird in hand’ – and happily did so from new owners who share our long-term vision and our values.

Personally, we are ready to live a much more contemplative and deliberate life. We are ready to invest in new experiences. We are pleased to let go of the risks & responsibilities of ownership.

TBT

The TBT has been an important part of our journey. Until joining this group over 3 years ago, I had no peer network to candidly work through the challenges, and celebrate the joys, of being a CEO/owner. The insights offered by the speakers, and the wisdom provided by Tom & Bill, have been instrumental in preparing Medicat for this acquisition. Among my favorite sayings attributable to Bill:
“Breakdowns lead to Breakthroughs” (or “Things don’t happen to you – they happen for you.”)
“Our reptilian brain…” (as it informs the typical fearful response to change – and how to reverse that dynamic in company culture.)

My TBT membership as CEO of Medicat has ended, but I would welcome any individual questions you might have about our journey as you consider yours. Finally, our apologies for not having attended TBT meetings or the retreat since July, but anyone who’s been through intensive due diligence knows why 🙂

Please accept our sincere thanks for letting us be a part of this group and benefitting from your collective wisdom.

All the best to each of you,

Stacy & Robin

* to paraphrase Bill Schwarz at the 2016 Sautee Retreat: “Find out what your clients hate to do, and offer to do it for them – better & cheaper.”

** an effort based on TBT-espoused principles with able consulting assistance from Stephen Wright, who I met as a TBT speaker in 2015.