Your SlideShare is downloading. ×
NAHC '09
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

NAHC '09

356
views

Published on

Homecare Valuations in the Real World: Putting Theory into Practice …

Homecare Valuations in the Real World: Putting Theory into Practice

Consolidation in the homecare industry continues at a torrid pace as larger operators continue to grow through acquisitions and private equity investors look for platform opportunities to enter the space. Valuation methods are easy to talk about, but harder to apply to real-world situations. This
presentation examines what makes a homecare agency valuable and how to articulate that value in a practical way that makes sense to both buyers and sellers.


0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
356
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. NAHC 28th Annual Meeting and Exposition October 12, 2009 Los Angeles, California Homecare Valuations in the Real World: Putting Theory into Practice Jack J. Eskenazi, Jr. , Managing Partner Healthcare Advisory Partners Brian Bruenderman, Director of Development ResCare Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 2. Overview •Concepts of Value •Value Drivers •Capitalization of Earnings Method •Case Studies Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 3. Concepts of Value •Market Capitalization •Book Value •Goodwill •Enterprise Value Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 4. Enterprise Value •Comparables •Buyers’ Perspective •Sellers’ Perspective Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 5. Value Drivers •Determine Premium or Discount •Qualitative Value Drivers •Quantitative Value Drivers Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 6. Qualitative Value Drivers •Business Mix •Geography •Management Depth Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 7. Quantitative Value Drivers •Size •Trends •Margins Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 8. Financial Statements •Transparent Financial Reporting GAAP •Accrual Basis Financial Statements •Break Out Direct and Administrative Expenses Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 9. Capitalization of Earnings Method •Service Companies use Income Approach •Boil Complexity Down to Single Number •Enterprise Value is Expression of Earning Power of Investment Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 10. EBITDA •Reproducible Cash Flow •Reliable # for Any Buyer’s Model •Adjusted EBITDA Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 11. Adjusted EBITDA •Nonrecurring Expenses •Owners’ Compensation •Personal Expenses •Add Backs & Subtractions Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 12. No Magic Formula •EBITDA Multiplier •3-5x Adjusted EBITDA •Transaction Structure •Convention Due to Historical Pattern: Not Prescriptive •Typically between 1xGP and 1xRevs Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 13. Real World Context •Market Conditions •Regulatory Environment •Financing Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 14. Formulas Must be Applied with Intelligence •Analyze within Context of Industry and Individual Benchmarks •Is Operation Reproducible? •Guideline – Not Prescriptive Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 15. Case Study: Small Transactions •Very Common but Formulas Least Applicable •Licensure •Small but Viable •The Overachiever Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 16. Case Study: Medium Transactions •$2 - $15 Million •Standard from which Formula is Derived •Formula is Most Applicable •Premium •Discount Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 17. Case Study: Large Transactions •$15-$25+ Million •Platform Investment •Size Premium May Exceed 5xEBITDA Ceiling •Strategic Buyer •Financial Buyer Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 18. Case Study: Largest Transactions •Exceptional Cases •Often Publicly Traded •Often Exceed 5xEBITDA •Apria/ResCare/Healthfield/Addus Healthcare Advisory Partners Copyright 2009 All Rights Reserved
  • 19. Conclusions •Formulas Reflect Market Parameters •Formulas Must be Applied Intelligently •Market is Active and Robust •Good Companies Available for Premium •Weaker Companies Available for Discount Healthcare Advisory Partners Copyright 2009 All Rights Reserved

×