This document summarizes a presentation on homecare valuations given at the NAHC 28th Annual Meeting and Exposition in Los Angeles in 2009. The presentation discusses concepts of value, value drivers, the capitalization of earnings method, and case studies of small, medium, large, and largest homecare transactions to illustrate how valuation formulas should be applied intelligently within context.

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
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2. Overview
•Concepts of Value
•Value Drivers
•Capitalization of Earnings
Method
•Case Studies
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3. Concepts of Value
•Market Capitalization
•Book Value
•Goodwill
•Enterprise Value
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4. Enterprise Value
•Comparables
•Buyers’ Perspective
•Sellers’ Perspective
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5. Value Drivers
•Determine Premium or
Discount
•Qualitative Value Drivers
•Quantitative Value Drivers
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6. Qualitative Value
Drivers
•Business Mix
•Geography
•Management Depth
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7. Quantitative Value
Drivers
•Size
•Trends
•Margins
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8. Financial Statements
•Transparent Financial Reporting
GAAP
•Accrual Basis Financial Statements
•Break Out Direct and Administrative
Expenses
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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
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10. EBITDA
•Reproducible Cash Flow
•Reliable # for Any Buyer’s
Model
•Adjusted EBITDA
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11. Adjusted EBITDA
•Nonrecurring Expenses
•Owners’ Compensation
•Personal Expenses
•Add Backs & Subtractions
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12. No Magic Formula
•EBITDA Multiplier
•3-5x Adjusted EBITDA
•Transaction Structure
•Convention Due to Historical
Pattern: Not Prescriptive
•Typically between 1xGP and
1xRevs
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13. Real World Context
•Market Conditions
•Regulatory Environment
•Financing
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14. Formulas Must be Applied
with Intelligence
•Analyze within Context of
Industry and Individual
Benchmarks
•Is Operation Reproducible?
•Guideline – Not Prescriptive
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15. Case Study:
Small Transactions
•Very Common but Formulas
Least Applicable
•Licensure
•Small but Viable
•The Overachiever
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16. Case Study:
Medium Transactions
•$2 - $15 Million
•Standard from which Formula
is Derived
•Formula is Most Applicable
•Premium
•Discount
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17. Case Study:
Large Transactions
•$15-$25+ Million
•Platform Investment
•Size Premium May Exceed
5xEBITDA Ceiling
•Strategic Buyer
•Financial Buyer
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18. Case Study:
Largest Transactions
•Exceptional Cases
•Often Publicly Traded
•Often Exceed 5xEBITDA
•Apria/ResCare/Healthfield/Addus
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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
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