The Opportunity Is Here: What The Data May Be Saying

By Tom Schramski, PhD, CMAA

Volume 2 Issue 11, May 26, 2015

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GF Data®, one of the premier data sources in private M+A transactions in the $10-250 million range, recently released its data on private equity deals for the Trailing Twelve Months (TTM) that ended on March 31, 2015. There are some emerging insights that today’s healthcare business executives should consider:

  • Valuations of businesses with three unique factors are often appreciably higher than those entities without the same factors in play.  These factors include above average financial performance, a strong management solution after the closing of the transaction, and institutional vs. individual/family ownership prior to the business sale.
  • Valuations for “add on” businesses (those smaller businesses that are acquired to enhance the investment in a much larger business platform) are now approaching, and even surpassing, some platform valuation multiples of EBITDA (see Chart 3).
  • Healthcare EBITDA multiples remain relatively high, especially for businesses in the $25-50 million Total Enterprise Value (TEV) range (8.3x), as well as deals in the $100-250 million range (9.9x) (see Chart 16).
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What does this all mean for a healthcare business owner considering a transition?  Of course, it always depends on multiple factors not incorporated in this data, including personal goals and objectives.  Yet, all things given, we know the healthcare marketplace remains active with abundant opportunities for successful transactions involving relatively small companies.  It is also clear that higher value is given to consistently profitable healthcare businesses that have a strong team in place and are operated as a business.  When buyers can clearly see your value, you will be rewarded for the clarity.

Note: GF Data® provides data on private equity-sponsored M+A transactions with enterprise values of $10 to 250 million.  GF Data® collects transaction information from private equity groups (PEGs) on a blind and confidential basis.  Information from GF Data® may not be used in work product or republished in any form without written permission of GF Data Resources, LLC or Vertess Advisors, LLC.