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American Healthcare Capital Brochure

American HealthCare Capital ∙ Executive Offices   4333 Admiralty Way, Marina del Rey, CA 90292 ∙ Ph 800‐424‐1338 ∙ Fax 310‐437‐4448  www.americanhealthcarecapital.com ∙ info@americanhealthcarecapital.com  ©2008 American HealthCare Capital, All Rights Reserved    WHY SOME DEALS DON’T CLOSE The healthcare services mergers and acquisitions marketplace is very robust. There are consolidating buyers in every segment using acquisitions to gain advantage within this highly fragmented industry. Even though the environment is conducive to successfully closing transactions, some deals don’t close. Although it may be an unpleasant topic, we think it’s important to address some of the reasons why certain deals don’t close. Typically there is something about the company or current market conditions that prevent that particular transaction from being viable at that particular moment. Company Individual company characteristics that can impact the selling price are known as value drivers. Certain value drivers are commonly associated with a given company not yielding the premium demanded by the seller. Trends and Margins: revenue, gross profit, EBITDA. Buyers make acquisitions to help them grow. If an acquisition candidate has a slow growth rate or weak gross or net margins, the buyer will not pay a premium. If a seller lacks critical mass in terms of revenues or management depth, buyers will discount accordingly. Liabilities: IRS, CMS, others. Sellers should expect to satisfy all outstanding liabilities from the proceeds of the sale. Any misrepresentations by the seller can cause buyers to lose interest. If the proceeds from the sale cannot satisfy all outstanding liabilities, sellers may not want to close a transaction. If the seller cannot transfer clear title and all necessary licensure, buyers may not want to close a transaction. Market Conditions Merger and acquisition market conditions can fluctuate drastically due to circumstances beyond anyone’s control. No matter how well an acquisition candidate performs, it must be considered within the context of the overall marketplace. Operating Environment: regulatory and administrative. Each segment within the healthcare services industry is subject to its own set of operating parameters that can impact value. Whether it may be PPS in Medicare, business mix in staffing, or workers’ compensation issues in private pay, external operating conditions can definitely stimulate or diminish activity in the market. Buyers in the Market: perceptions and premiums. How buyers perceive acquisition targets in the marketplace is a very important component of value. Of course buyers want stable, growing companies with competent


American Healthcare Capital Brochure
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