Is There ‘Hidden Value’ in a Poorly Performing ASC?

Published by Becker’ ASC Review

Struggling ASCs come in all shapes and sizes. Some ASCs have enjoyed success in the past and now find their prosperity has taken a significant hit due to the many headwinds confronting the ASC industry. Others have struggled from day one due to inadequate volume levels, high fixed costs, too much debt or altogether mismanagement.

Regardless of their method of arrival, these ASC owners find themselves in a position where decisive action must be taken to right the ship. Often, in an effort to accomplish this, existing owners make the choice to sell a controlling interest in their ASC to a third-party investment group, management company, hospital or some combination thereof. When pursuing such action, it is crucial for existing owners to realize where the value in their center may reside and fully comprehend what can, and cannot, be considered by acquiring entities when determining purchase price.

The first thing to note is it is highly likely that the acquiring entity will not legally have the ability to pay an amount that exceeds fair market value (FMV). Without going into great detail, when determining FMV, an accurate and reliable appraisal should analyze your ASC from a “hypothetical” or “typical” buyer’s perspective. Approached from this perspective, there very well may be hidden value in your center that is not readily apparent by analyzing historical financial performance. The following are some discussion points to consider:

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