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Valuation approach: Clinical Practice

Please find attached some details relating to a physician acquisition. Please help with the following issues:

1. I need to evaluate what Dr. Roses' practice is worth from the perspective of Hospital CEO.

2. Also, I need help determining a bidding strategy (opening bid, walk-away value)

3. Then I need help determining which valuation methodologies are most appropriate? (DCF, Market Multiple, Transaction Multiple, etc)

4. And lastly I need help on what the key risks and key assumptions would be.

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1. I need to evaluate what Dr. Roses' practice is worth from the perspective of Hospital CEO.

From the perspective of hospital CEO, the practice will be valued by pursuing multiple valuation methodologies, such as DCF and market or transaction multiples approach as it is difficult to rely solely on one methodology (reasons given below). As per current scenario, similar practices in the area are selling for .5-1 x of revenues. The revenues of the firm is $400,000 and declining regularly. Hence, on a conservative estimate, the valuation of the practice should be based on the lower side of the multiple, ie, .5X of revenue or 200,000.

The hospital should cross check this valuation by using DCF for their own internal use. They should not only include the cash flow from this practice, but should also incorporate cash flows generated due to the potential synergies, such as improved occupancy ratio of hospital, etc. By pursuing this approach, the hospital CEO will be able to value the practice in a much more reliable and accurate manner.

2. Also, I need help determining a bidding strategy (opening bid, walk-away value)

The appropriate bidding strategy for ...

Solution Summary

The solution discusses valuation of clinical practice.

$2.19