Valuations within the Medicals or Healthcare Services industry.

Speaking of Medical Industry we are referring to Hospitals or acute care providers, clinics and rehabilitation centers.
Hospital operations vary basis their speciality like cardiology, oncology and are also multi-speciality depending on the type of care provided – for example, short term acute care or long term post-acute care.

Hospital revenues primarily come in form of in-patient vs outpatient revenues. As the revenue mix is not totally dependent on inventory of beds, the Enterprise Value to EBITDA is a more commonly used approach over the price per Bed comparable.

P/E multiples are also utilized, but have a drawback of not considering the capital structure of the business.

In situation where the facility land is leased, we can value the business by valuing the facility land & building using the cost approach and deducting from total asset value obtained from comparable approach.

Capio is a pan-European operator of Hospitals and clinics with over 189 care facilities serving 5 million patients annually across Sweden, Norway, Denmark, France and Germany.

Utilizing the comparable approach, we identify similar transactions or listed peers to see if they are valued at similar multiples.

In October 2018, Ramsay Healthcare, Australia’s largest healthcare services provider offered to take over Capio for an enterprise value of over 1.2 billion Euros.
Given Capio’s financials from its stock market filings show that the transaction happened at a 11.2 times Enterprise value to EBITDA multiple

In this list of comparbles, we have a list of companies having presence in specific countries only, except ORPEA which has a global presence. the overall mean Enterprise Value to EBITDA multiple is 11.5 times and median is 12 times.
You’ll notice that ORPEA at number 4 is a long-term care business as opposed to Capio’s acute care model.

If we consider only the acute care businesses, you’ll see multiples averaging at 11 times EBITDA with a median of 10.4 times. We can reason that the 11.2 enterpise value to EBITDA multiple of Capio is justified in account of a geographical diversification premium over the mean or median of other single country concentrated acute care businesses.
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