BB Investment Banking Healthcare

they don't really use any unique valuations methods that other groups wouldn't use. They do however use more tools in the toolkit as the healthcare sector is so diverse.

Probability weighted DCFs etc... your kidding. Nobody ever uses something that complicated. Please let me know if you've ever seen one at work.

more than different valuation techniques, i think the primary difference is that healthcare will use different operating metrics when looking at companies in the industry. So, for example, for a private hospital operator, they would look at

ALOS (avg length of stay), in-patient & out-patient volume, procedure volume, etc...among many others.

But that is just one example. Someone in Healthcare Investment Banking, feel free to tell me I'm wrong :-)

Thanks a lot guys this is helpful.

Also - does anybody know which 'branches' of healthcare make attractive LBO prospects? Have read about a few LBOs of care/nursing homes (i.e. Terrafirma buying Four Seasons in the UK). and would it be enough at interviews to just touch on the fact that nursing/care homes in this context make decent candidates for LBO because they've got pretty stable cash flows - and then go down the demographic route (ageing population underpinning Revenue growth and FCF generation for debt paydown)?

Thanks a lot.

As with any prospective LBO target, the company would have to have large, predictable cash flows that could support the debt load placed on it by the financial sponsor. Additionally, many players in the health care industry have relatively inelastic demand for their product. As long as those companies have a relatively predicable cost base, they might be attractive as well.

With all the boomers set to retire, long term care/nursing homes seem like they might fit that bill. I have a friend that works in the industry and they are defintely setting their sights on some pretty significant growth.

Thanks cdnbanker. could you very briefly explain to me how this works in practice ie weights applied through different stages of clin. trials and how terminal value is dealt with i.e. (growing perpetuity/ or whether an exit multiple is applied).

If you need equity research reports and industry primers on this industry, I have a few.

Biotech is ridonculous if you want quick and large gains, but you need a strong scientific background to distill the proof of concept behind novel compounds. There seems to be alot of guys in healthcare devices and services with business background tho.

what couchy said it wrong - i used weighted valuation for pharma clients that have drugs in the pipeline pending fda approval. no other way to value them accurately enough if the drug hasn't been commercialized yet. It is the most widely used valuation method in biotech.

I'm sorry. I take back what I said. I interned 3 summers at one of the big healthcare buyside shops and never saw probability weighted dcfs.

With that said, when I went through training, they actually did teach me probabilit weighted valuation and real options valuation. I just never saw one outside of training

But overall in practice we used multiples and LBO / VC method valuation, which is pretty standard across most pe firms.

http://www.wallstreetoasis.com/forums/healthcare-overview-part-1

Probably have your own opinion on where you think the Healthcare/Biotech/BP space is going in the future: Renewed focus on R&D? M&A with a continued focus on inversions?

Probably have an opinion on the costs/benefits of inorganic vs. organic growth so you sound intelligent and that you can display to your interviewer that you have a genuine intellectual interest in the field.

Maybe a stock pitch, you never know.

More importantly, have your behaviorals down pat. Why you want to work at that specific firm, why banking, why healthcare, etc. Make sure you don't bore them with your story and make yourself sound interesting and more hardworking than other candidates.

Thanks man, great advice. Silver Bananaed.