At Oakmark Advisors, a company's valuation is more than simply a price at which a business will sell. A valuation is at the core of what makes a business unique.
As part of our service array, we work with our clients to assist them in evaluating the backdrop for what drives valuations up or down in the healthcare and human capital sectors we are dedicated to servicing.
In its simplest form, the valuation of a firm is based upon the trilogy of cash flow, growth and risk.
Typically, we find that valuation methodology is based upon the following variables:
- Income and market based approaches to financial valuation that include measuring tangible and intangible assets, benchmarks of industry valuations, and cash flow analysis
- Evaluation of the short and long-term regulatory and business environment landscape
- Clinical and operational benchmarks
- Marketing plan implementation and sales force effectiveness
- Referral and client risk assessment
- Competitor density
- Compliance and quality assurance measures
- Patient, client and referral source satisfaction
- Opportunities for revenue, margin, and income gain
We offer a complimentary valuation review upon request that will require a discussion regarding:
- At least 3 years of Income Statements and Balance Sheets
- Depreciation Schedules
- Tax Returns
- Business and Marketing Plans
At Oakmark, we will typically express a valuation range as a percentage of annual sales or a multiple of earnings. In addition, we work to unite parties with a mutual understanding of the EBITDA components that are typically subjective such as:
- Revenue Recognition
- A/R Reserves
- Depreciation Schedules
- Owner Discretionary Expenses
- Non-Recurring Expenses
Certain buyers may be willing to pay a premium about the fair market valuation of a firm given service area and service line market conditions. As advisors, we work to assist potential buyers with understanding the strength of middle-management and the underlying referral and client base demographics that may justify premium valuation methodology. Likewise, if a homecare or human capital business has had recent growth, we work with both sides to equate earnings multiples or revenue base assumptions on grounded terms that evaluate the demonstrated pipeline, contracts, and historical review of strategic growth plans and the corresponding results. Buyers must be confident that valuation ranges are based on clearly defined historical results and that trending patterns or anticipated proforma growth trends are grounded in executable business plans post sale.
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