Becker's ASC Review

13 Executive Briefing: Merger & Acquisition Activity for ASCs Sponsored by: T he ambulatory surgery center industry continued signifi- cant levels of acquisition activity in 2014, and acquisition activity is expected to remain high for 2015, according to the HealthCare Appraisers "2015 ASC Valuation Survey." In the survey 71 percent of the ASC company respondents acquired at least one ASC, with 24 percent reporting the acquisition of be- tween six and 10 centers. For 2015, 60 percent of respondents plan to purchase between one and five ASCs, and 25 percent plan to purchase between six and 10 ASCs. Valuation multiples Controlling Interests Valuation multiples for single-specialty ASCs reported by respon- dents in the 2015 Survey shifted higher overall, with 24 percent reporting multiples of 7.0 to 7.9 times EBITDA, versus 20 percent in the prior year's survey. However, as set forth in the following graph, there were some shifts in the 4.0 to 4.9 times (i.e., fewer), 5.0 to 5.9 times (i.e., more), and 6.0 to 6.9 times (fewer). In addition, multiples for multispecialty ASCs are comparatively higher than those reported in the previous survey. According to the current survey, 78 percent reported multiples of 7.0 to +8.0 times EBITDA for controlling interests in multispecialty ASCs, ver- sus 56 percent in the prior survey. Minority (non-controlling) Interests Multiples for non-controlling interests are significantly lower than their controlling interest counterparts, as a buyer is willing to pay less for an interest that lacks certain prerogatives of control (i.e., conversely, buyers pay premiums for interests which carry with them control rights). As set forth in the following graph, single spe- cialty minority interest multiples generally range between 4.0 and 4.9 times, with the increase predominantly coming from 3.5 to 3.9 times in the prior survey. Similar to controlling interest multiples, multispecialty minority in- terest multiples are higher than their single specialty counterparts, with 27 percent of the respondents reporting multiples between 5.0 and 5.9 times versus 6 percent for single specialty. Further- more, based upon the results of this year's survey, multispecialty multiples have generally increased over the prior year. Industry Forces Consolidation "While we observe a diminishing growth rate for new ASCs and continued pricing pressures, we continue to see robust transac- tional activity in a maturing industry, which we note is still largely unconsolidated. According to a recent article published by Medical ASC M&A Activity: Trends for 2015 From HealthCare Appraisers www.HealthCareAppraisers.com | info@hcfmv.com | (561) 330-3488 DELRAY BEACH | DENVER | DALLAS | CHICAGO | PHILADELPHIA HealthCare Appraisers - Redeening Healthcare Valuation Since 2000

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