Business valuation mandate in the context of a strategic merger

Mandate description

The objective of the mandate was to determine the fair economic value of a company operating a multidisciplinary medical center dedicated to the management of musculoskeletal pathologies.

The evaluation was conducted in the context of a strategic partnership, aimed at strengthening cooperation between the two structures, in particular through the sharing of medical resources, the sharing of management and the improvement of the territorial network.

The role given was that of an independent arbitrator, mandated by the purchaser to estimate the value of the target company on the basis of a rigorous financial approach and a precise understanding of the operating model of a private medical center in French-speaking Switzerland.

Key issues

The main challenges consisted of:

• determine the fair value of a medical center based on a high human intensity service activity;
• assess the sustainability of revenue streams related to patients and medical partnerships;
• measure the organizational and financial impact of a merger on the quality of care and the profitability of the group;
• ensure an impartial value arbitration between the two departments, guaranteeing the economic coherence of discussions;
• and provide a solid decision-making basis to support the governance of the merger project.

Approach and results

The evaluation mobilized a set of complementary financial approaches, adapted to the specificities of medical services:

• the return method, based on the capitalization of the standardized average earnings capacity;
• the discounted cash flow (DCF) method, integrating management synergies, pooling effects and post-merger growth prospects;
• the market multiple method, based on a sample of comparable medical centers in Switzerland and Europe;
• the multiple scholarship method, applied to listed players in the health sector in order to establish a sectoral valuation reference;
• the substantial value method, making it possible to identify the net asset value of the center's fixed assets and medical investments;
• and the practitioner's method, combining the return value and the substantial value of the target company.

The cross-analysis of these approaches made it possible to identify a coherent strategic value interval, integrating both current economic parameters and medium-term value creation levers.

This mission contributed to objectifying the discussions between the parties, by providing a balanced and reasoned assessment, reconciling financial, medical and human considerations.