How Does Valuation Work For Healthcare Provider Companies?
Let’s say is a plastic surgery rollup. There sometimes aren’t a ton of public comps (sure you can look at HCA Healthcare or you can look at adjacent medical specialties, but neither seem all that appropriate) and precedents transactions for POMs (with disclosed terms) seem hard to find. How do you figure out an appropriate entry valuation range? (e.g., 8-10x EBITDA? 10-12x? 6x EBITDA for each tuck-in?) Rookie question, maybe, but curious if anyone has any thoughts.
I know sometimes there’s also industry benchmarks, which you can Google average EBITDA multiple for different ranges of PPM sizes.
Not sure if there’s a best practice.
Seems kind of crazy to base the entry EBITDAmultiple for the acquisition of some plastic surgery rollup off of US Physical Therapy, for example. But that’s the closest, publicly traded company I could find.
And then I didn’t find any precedent transactions at all.
Comps tell you nothing, its truly a component of finance that is basically lying with extra steps. What people can actually pay is the price that will get them the return they need. So if the buyer universe is sponsors that at least need to get a mid teens irr you can work backwards based on the debt capacity of the company (fcf) and the operating case. Comps are total bs idk why people even do them it’s the most performative part of working in finance.
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