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Shareholder Exit

Upon approaching retirement age, one of the three shareholders in a private hospital wanted to resign from the board and sell his shares to the remaining two shareholders, plus his successor on the board. The remaining shareholders asked Schreiber Finanz to recommend an appropriate purchase price for these shares.

To determine an appropriate purchase price, the buyers needed an objective market valuation of the hospital. They also needed to understand both their and the seller’s intentions and options. These two inputs – market valuation and the parties’ intentions/options – are always critical to any client’s ability to negotiate and ultimately, find a mutually agreeable price with the counterparty.

As in all enterprise valuations, Schreiber Finanz began by analyzing and correcting the hospital’s profit and loss statements from the previous few years for non-arms-length elements (e.g. whether owner manager salaries were too high or too low compared to market salaries). We also revalued the hospital’s balance sheet so that the equity reflected the hospital’s net assets at market value. As for the determination of the earning value, we took a simple approach as our clients requested and based it on an estimated sustainable Earnings before Interest and Tax (EBIT) and net profit (rather than using discounted cash flows from an explicit multi-year plan). Our detailed written summary gave our clients ample theoretical and methodological explanations to answer any questions and counter any arguments the seller might present.

Based on Schreiber Finanz’s well-argued presentation of value and price, our clients successfully came to an agreement with the seller within just a few weeks. And, equally important, our clients felt confident that the purchase price they offered was realistic and fair.

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