Valuing an Urgent Care Center
Client/Profile
An urban hospital system
Challenge/Situation
To determine the fair market value of equity interest in a management company (the “Company”) that will own and operate a new urgent care center.
Process
Because the Company would effectively run the urgent care center and take on all risk, the Company’s projected financials were very closely tied to the success of the urgent care center.
Using the urgent care center’s projected financials as a starting point, Veralon developed five year profit and loss projections for the Company. The management fee paid to the Company by the urgent care center was carefully evaluated, as it was the Company’s main revenue source.
Results
In determining valuation based on the income approach, we used a discount factor that recognized the Company’s risk. The range of fair market value market determined by the market approach to value was consistent with the findings of the income approach. The fair market valuation determined was consistent with discussions among the partners developing the venture.
The deal closed and the urgent care center has opened with great success.