ASC Valuation Multiples: The Impact of Size

Occasionally we'll hear a selling owner of an ambulatory surgery center cite valuations of publicly-traded companies or multiples from recent M&A activity involving large national operators like Surgical Care Affiliates, AmSurg, or Covenant Surgical Partners as support for a 10-12x multiple in a deal for a single facility. While these valuations are not completely unheard of, they're definitely the exception rather than the rule. For example, a newer facility in a great market, with recent and expected future growth from a diverse group physician-investors, and minimal out-of-network exposure, might be able to approach these multiples.

We maintain a database of surgery center transactions, and one of our favorite ways to present the data is in a graph that compares the EBITDA multiple versus the size of the acquired company, as shown in the graph below.

The regression equation for the line running through the data can be used to calculate a baseline multiple for different sized centers or multi-location organizations.

These benchmark multiples are a starting point, and should be adjusted for a variety factors, including:

• Control-level of the ownership interest being sold

• New physicians and other growth opportunities

• Reliance on out-of-network payments

• Age, composition, and ownership of physicians

• Age condition of facility and equipment

• Specialty and case mix

• Payer mix

• Local competition

• State CON laws