Latest trends in healthcare valuations and healthcare acquisitions.

1. Demystifying Healthcare Valuations
March 2015

2. Presenter:
Chip Measells, MBA, CVA
www.healthcarevaluations.net
www.wyattmatas.com
Contact Information:
202.618.4713
chip@healthcarevaluations.net

3. What we will cover today
3
A. Demystifying Healthcare Valuations
B. Public Company Valuations
C. Healthcare Transaction Trends
D. Segment Coverage
1. Healthcare Staffing
2. Outpatient Rehab
3. Home Care
4. Behavioral Health

4. Why Valuations Are Needed
4
Strategic Valuations Needs
Mergers, Acquisitions &
Recapitalizations
Exit Strategy Planning Growth Opportunities
Tax Compliance Valuation Needs
Estates Gifting Trust Transactions
Controversy Resolution Valuation Needs
Shareholder Disputes
Corporate & Shareholder
Divorce
Buy-Sell Planning &
Trigger Events
Financing Reporting Valuation Needs
Purchase Price Allocation
Rights Valuation &
Impairment Testing
Benefit Plans

5. The Business Transfer Matrix
5
PARTIAL
SALE/TRANFER
TOTAL
SALE/TRANSFER
VOLUNTARY
TRANSFER
• Outside Investor(s)
• “Inside” Sale to Management
• “Inside” Sale to ESOP
• Combination/Cash Out
• Going Public
• Gifting Programs
• Buy-Sell Agreements
• Sale of Business
• Stock-for-Stock Exch.
• Installment Sale to
Relatives/Insiders
• ESOP/Management
Buyout
• Buy-Sell Agreements
• Liquidation
INVOLUNTARY
TRANSFER
• Divorce
• Forced Restructuring
• Shareholders Disputes
• Buy-Sell Agreements
• Divorce
• Bankruptcy/Forced
Restructuring
• Buy-Sell Agreements
• Liquidation
• Death

6. The Business Transfer Matrix
6
Market
Approach
Based upon
transaction
data from
similar
businesses
Asset
Approach
Based upon
the entity’s
underlying
assets and
liabilities
Income
Approach
Based upon
the entity’s
ability to
generate net
cash flow

7. Approaches to Value
7
Income
Market
Asset
Discounted Cash Flow
Or
Capitalized Earnings
Estimated Future Earnings
Or
Historical Earnings
Comparable Sale
Or
Guideline Company
Private Company
Transactions Involving Similar
Businesses
Or
Public Company Stock Prices
Adjusted Net Assets
Appraised Value of Assets
and Liabilities

8. Market Approach
8
• The value of the company reflects the price at which comparable
companies are purchased under similar circumstances.
• Requires that comparable transactions be available.
• Guideline publicly-traded company method
• Comparative transaction method

9. Market Approach
9
Earnings x
Multiple
(P/E Ratio)
= Value
Company Data InformationMarket Data
Financial Statements
Management Discussion
Other Company Information
Market Pricing
(Comparable Transaction)
Industry Benchmarks
Industry Expectation
Economic Outlook
Investment/Growth Decisions
Transaction Requirements
Death & Taxes
$1,000,000 x 5 $5,000,000=

10. Market Approach
10

11. Market Approach
11

12. Public Market
1210/9/2014

13. Public Company Valuation Trends—3 Months
1310/9/2014
-10.5%
-10.3%
-8.4%
-4.1%
-1.7%
-1.0%
0.0%
2.1%
4.0%
4.0%
4.0%
4.7%
6.0%
6.3%
6.7%
7.3%
7.8%
8.0%
8.1%
9.1%
9.2%
11.9%
12.0%
13.7%
17.3%
-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
Emergency Services
Diagnostic Imaging
Acute-Care Hospitals
Speciality Managed Care
Contract Pharma Manufacturing
Dialysis Imaging
Behavioral Health / Management
Assisted Living
Medical Devices and Prodcuts
Home Care, Hospice and Home Infusion
Long-Term Care
Information Services
Specialty Pharmacy Management
Surigcenters / Rehabiliation
Dental Products
Contract Research Organizations
Life Sciences Tools
Health Care Staffing
Durable Medical Equipment
Physician Practice Management
Medical / Surgical / Dental Supllies & Disstribution
HMO - Medical
Clinical Laboratories
Specialty Pharmacy
Disease Management
Median % Change--3 Months

14. Public Company Valuations Trends—12 Months
1410/9/2014
-18.8%
-17.7%
-1.9%
3.3%
4.5%
8.2%
8.9%
9.7%
12.4%
16.5%
16.8%
18.5%
19.6%
20.3%
20.4%
20.4%
21.4%
24.3%
25.1%
28.6%
28.9%
29.3%
30.3%
43.6%
-30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
Emergency Services
Speciality Managed Care
Long-Term Care
Assisted Living
Specialty Pharmacy Management
Information Services
Life Sciences Tools
Dialysis Imaging
Diagnostic Imaging
Medical Devices and Prodcuts
Health Care Staffing
Disease Management
Physician Practice Management
Medical / Surgical / Dental Supllies & Disstribution
Behavioral Health / Management
Acute-Care Hospitals
Contract Pharma Manufacturing
Dental Products
Contract Research Organizations
Surigcenters / Rehabiliation
Clinical Laboratories
Durable Medical Equipment
Home Care, Hospice and Home Infusion
HMO - Medical
Median % Change--12 Months

15. Private Equity Interest in Healthcare
1510/9/2014
236
219 229 221
291
200 209
304
248
304
290 279 292
106
18
11
20
12
22
16
12
18
15
22
14
11
15
4
-
50
100
150
200
250
300
350
4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
Quarterly M&A Activity
Number of M&A Tranaction Strategic Acquirer Number of M&A Tranaction PEG Acquirer

16. Private Equity Interest in Healthcare
16
58
69
94
113
79
42
71 65 65 61 62
4
40
60 62
95
49 50
80
120
139 144 143
8
0
20
40
60
80
100
120
140
160
PEG Investment and Exits
PEG INVESTMENTS AND EXITS Number of Investments
PEG INVESTMENTS AND EXITS Number of Exits
Segment
Number of
Companies
Biotechnology 3
Healthcare Technology 17
Healthcare Distribution 8
Healthcare Equipment 21
Healthcare Facilities 45
Healthcare Services 48
Healthcare Supplies 10
Life Sciences Tools & Services 17
Managed Healthcare 4
Pharmaceuticals 19
Private Equity Investments-Last 3 Years

17. Sector Coverage
10/9/2014
Disclaimer: Because each segment we discuss is so broad and each has its
own sub-segments, we use valuation ranges in discussing valuation
multiples. A professional business valuation should be conducted to
determine the precise value of a business.

18. Healthcare Staffing
Valuations: 3-6x EBITDA, bonus for niche and scale.
• Hospitalist
• Specialty Staffing
• Niche Travel Staffing
Hot Segments
10/9/201418
70
95
85
109
125
142
0
20
40
60
80
100
120
140
160
2009 2010 2011 2012 2013 2014
Healthcare Staffing Transactions

19. Behavioral Health
BH Includes
• Adult Mental Health
• Addiction/Sub Abuse
• Brain Injury
• Intellectual/Developme
ntal Disabilities
• Youth Services
• Addiction/Sub Abuse
• Autism Care/Treatment
• In Home BH/Mental
Health Care
Hot Segments
Valuations: 3-8x EBITDA
10/9/201419
6 6
8
5
12
16
18 18
20
15
22
25
22
18
16
24
22
20
22
25
0
5
10
15
20
25
30
Behavioral Health Transactions

20. Medicare Home Healthcare
Valuations: 3-5x EBITDA, bonus for CON and scale.
10/9/201420
45
51
62
54
0
10
20
30
40
50
60
70
2010 2011 2013 2014
Medicare Home Health Transactions

21. Hospice Transactions
Valuations: 4-6x EBITDA, bonus for CON and scale.
10/9/201421
7
8
14
10 10
6
10
11
9
7
12
10 10
4
5
6
4 4
6
3
6
0
2
4
6
8
10
12
14
16
Hospice Transactions by Quarter

22. Other Home Care
Home Infusion—Services
Valuation: 4-6x EBITDA
Private Pay Home Care
Valuation: 3-5x EBITDA—Bonus for Scale
Medicaid/Personal Care
Valuation: 2-4x EBITDA
10/9/201422

23. Outpatient Rehab
Valuations: 4-8x EBITDA
10/9/201423
29 31
42
59
0
10
20
30
40
50
60
70
2010 2011 2013 2014
Outpatient Physical Therapy
Transactions

24. Presenter:
Chip Measells, MBA, CVA
www.healthcarevaluations.net
www.wyattmatas.com
Contact Information:
202.618.4713
chip@healthcarevaluations.net