What do you see as the typical pricing of deals today?

When we speak about pricing the default is to discuss it in terms of multiples of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization), but my disclaimer always is that in reality the devil is in the details because you can influence EBITDA.

When we look at pricing we typically break it down into two main categories: control equity interest and non-control ownership interest (aka majority ownership and minority ownership). Please note that when we refer to control and non control we are referring to financial control and not clinical or business decisions.

For minority interest purchase pricing, the lowest that I have seen for functioning centers is 2.5 times EBITDA. We have gotten some lately in the 5 times EBITDA range, with the bulk of transactions in the 3-4 range. There are some instances when the purchase price has been less, but that was for centers in need of a turnaround or centers that went dark, and then asset value comes into play.

When buyers or investors look at a potential deal or investment or purchase, they look at the potential deal through the risk lens. The riskier the deal that the investor sees, the lower the offer price will be. The lower the perceived risk, the higher the offer will be.

With majority interest purchase prices, the lowest that I have seen for a single surgery (as opposed to buying multiple surgery centers in one transaction), the lowest multiple of EBITDA that I have seen is 3.5. The highest that I saw in 2011 was 9 times EBITDA, with the majority falling in the 5-7 range. The 9x was a single specialty pain surgery center that actually had a significant amount of out of network business, and the buyer was a motivated financial buyer involved in their first healthcare transaction. The strategic buyers were offering numbers in the 3x-4x range.

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Category: Valuating My ASC

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