American HealthCare Capital ∙ Executive Offices 4333 Admiralty Way, Marina del Rey, CA 90292 ∙ Ph 800‐424‐1338 ∙ Fax 310‐437‐4448 www.americanhealthcarecapital.com ∙ firstname.lastname@example.org ©2008 American HealthCare Capital, All Rights Reserved M&A FREQUENTLY ASKED QUESTIONS Q. How much is my company worth? A. Many healthcare service providers sell within a range between 3-5 x normalized EBITDA; that is to say, a multiplier of EBITDA. This most commonly used formula is a pretax earnings multiplier that assumes an asset purchase where the seller keeps the cash and accounts receivable and is responsible for any liabilities associated with the company. Larger, more profitable companies can sell for a premium above the range while smaller, marginally profitable companies can sell for a discount below the range. Actual financial and operational data is required to do a genuine valuation. At American healthcare Capital, we offer a FREE “no strings attached” preliminary valuation to any healthcare provider who wishes to investigate a divestiture. Q. How long will it take? A. The seller has a lot to gain by following a carefully measured process. IN order to allow time for: a) the collection and analysis of data for valuation, b) the qualification of prospective buyers and the execution of confidentiality agreements, c) the negotiation of the letter of intent, d) the completion of due diligence, and finally, e) the negotiation of the definitive purchase agreement and the transfer of all applicable licenses, most sellers can expect a 60-90 day process from the decision to sell to the close of the transaction. In a hot market the timetable can be accelerated, but in cooler times the pace can be glacial. Q. Do we know a buyer? A. Yes! American HealthCare Capital has ongoing relationships with active buyers of homecare, DME/IV/02, medical staffing, acute care, long term care, diagnostic imaging and all other healthcare service providers. However, the M&A marketplace is subject to constant change as market conditions cause buyers to become sellers and sellers to become buyers. Because we are always in the market, AHC knows who’s buying at a premium, who’s selling for a discount, and what deals can get financing. If we don’t already know enough good candidates, we will conduct a dedicated search to identify and qualify new prospects. We are always happy to discuss current market conditions. Q. What is the difference between an asset purchase and a stock sale? A. In a stock sale, the seller sells the actual corporation including all assets and liabilities, usually including cash, accounts receivable, bank debt, and all IRS/CMS liabilities. In an asset purchase, the buyer only buys certain core assets of the company, usually leaving the seller with the cash, accounts receivable, and all liabilities associated with the company. Whether a transaction is an asset purchase or a stock sale, who actually gets what assets and liabilities at closing is entirely negotiable. Generally speaking, the seller gains a tax benefit from a stock sale and the buyer gains a tax benefit from an asset purchase. Because of the risk associated with contingent liabilities, many (but not all) transactions in the healthcare industry are asset deals. In all cases, it is extremely important to consult with a qualified tax advisor and an experienced transactional attorney before entering into any binding agreements.
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