Volume 6 Issue 10, May 21, 2019
Ever wondered why two seemingly similar companies sell at significantly different multiples? What are buyers considering in ostensibly comparable companies that cause sale price differences? Let's discuss five key secrets of market multiples:
A diversified payor mix can help reduce the impact of these risks. If a company loses a contract, it can fall back on other contracts to drive business. The company maintains leverage during negotiations; if a contract's terms are unreasonable, the company knows it can walk away from the negotiating table, if necessary, and still have ways of generating revenue. The company can better absorb the negative impact of payment delays associated with a single contract. Finally, a payor audit that creates payment challenges (and possible repayments) is not as likely to cripple the company.
5)
—It is quite common for company owners to perceive the market value of their company in terms of market multiples based on prior sales of similar companies. But when comparing themselves to "similar" companies that have sold, they may not be privy to information about matters such as growth potential, scalability, management traits, and company-specific risk of those prior sales (a.k.a., the "secrets" that impact market multiples). Understanding these factors — and knowing how to strengthen them prior to a sale — is critical to securing the best price for your company.
David is a seasoned commercial and corporate finance professional with over 30 years’ experience. As part of the VERTESS team, he provides clients with valuation, financial analysis, and consulting support. He has completed over 150 business valuations. Most of the valuation work he does at VERTESS is for healthcare companies such as behavioral healthcare, home healthcare, hospice care, substance use disorder treatment providers, physical therapy, physician practices, durable medical equipment companies, outpatient surgical centers, dental offices, and home sleep testing providers.
David holds certifications as a Certified Valuation Analyst (CVA), issued by the National Association of Certified Valuators and Analysts, Certified Value Growth Advisor (CVGA), issued by Corporate Value Metrics, Certified Merger & Acquisition Advisor (CM&AA), issued by the Alliance of Merger & Acquisition Advisors, and Certified Business Exit Consultant (CBEC), issued by Pinnacle Equity Solutions. Moreover, the topic of his doctoral dissertation was business valuation.
David earned a Doctorate in Business Administration from Walden University with a specialization in Corporate Finance (4.0 GPA), an MBA from Keller Graduate School of Management, and a BS in Economics from Northern Illinois University. He is a member of the Golden Key International Honor Society and Delta Mu Delta Honor Society.
Before joining Vertess, David spent approximately 20 years in commercial finance, having worked in senior-level management positions at two Fortune 500 companies. During his commercial finance career, he analyzed the financial condition of thousands of companies and had successfully sold over $2 billion in corporate debt to institutional buyers.
He is a former adjunct professor with 15 years' experience teaching corporate finance, securities analysis, business economics, and business planning to MBA candidates at two nationally recognized universities.