Imaging Center Valuation: What Is Your Facility Worth?

imaging center valuation

Published by Radiology Business Journal

While recent imaging center deals indicate valuations all over the board, there are reasons why some centers command top dollar and others reflect fire-sale prices.  Easy answers to the question of imaging center valuation abound, but are they the right answers? Los Angeles-based RadNet’s market value of invested capital (MVIC), defined as the sum of the market value of debt and equity, represents 10 times the trailing 12 months’ earnings before interest, taxes, depreciation, and amortization (EBITDA). Should your facility also be worth a 10 times the trailing 12 months’ EBITDA? Assuming that Wall Street continues to value a public company at a given figure after the acquisition, an acquisition at half of that figure results in an addition of the acquisition price times the target EBITDA in value for the public company.

As long as public companies continue to operate the target businesses at similar levels of profitability and the arbitrage (the difference between the public company’s multiple and acquisition multiples) holds, the value proposition is strong. For your imaging center, though, this means that its value as a multiple of EBITDA is more than likely to be something significantly less than RadNet’s multiple. Perhaps, then, the recent acquisition of MedQuest, Alpharetta, Ga, and its 95 imaging centers by Novant Health, Winston-Salem, NC, can be used as a guideline for the value of your facility. In August 2007, MedQuest announced that it would be acquired by Novant for more than $400 million. Novant’s assumption of MedQuest’s debt ($360 million) and additional cash ($45 million to $80 million) represent a multiple of approximately 12 times the trailing 12 months’ EBITDA. Novant is a not-for-profit integrated delivery system with hospitals, physician practices, and imaging centers that provide services to residents in counties reaching from southern Virginia to northern South Carolina. While there certainly must be significant strategic value to Novant’s acquisition of MedQuest—given that a significant portion of MedQuest’s centers are located in the states of Virginia, North Carolina, and South Carolina (where Novant has a significant market share), where certificates of need (CONs) are relatively difficult to obtain—it seems to be only a remote possibility that the fact pattern in this transaction and these strategic considerations should be applied to your particular center

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