What can an ASC do to lower the cost of the shares or units being sold?

With interest rates near historic lows you may consider adding debt to the center. This is referred to as a Dividend Recap in the Investment Banking world. Ambulatory surgery centers are valued on a fair market method based on the ASC’s earnings before deducting interest, taxes, depreciation and amortization (EBITDA). This gross earnings number is then multiplied by a fair market value multiple, minus the ASC’s long-term debt, then multiplied once more by the percentage to be acquired by the physician buyer thus the additional debt reduces the ASC’s valuation. The borrowed money could be distributed to the existing owners, allowing them to keep essentially the same money in their pockets and allowing the new surgeons a lower buy in price.

There are some alternative methods along the same line. Some of these strategies include selling fractional interests or diluting the shares by a stock split, locating a list of third parties that are in the business of lending money that is not associated with the surgery center that will finance the investment, etc.

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Category: Valuating My ASC

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