'A reduction of values?  Not yet.'

Dexter Braff (The Braff Group, Pittsburgh) responded to the June 4th BVWire article titled "Slee on the 'new math' of M&A" that discussed Rob Slee’s (Robertson & Foley) Midas Manager blog and Slee’s observations of a reduction in EBITDA market multiples due to constraints in the debt markets.  Braff wrote:

While I agree that the availability of debt capital can impact a buyer’s ability to finance a transaction, I think it’s important to point out that this does not impact the underlying value of the entity, rather the number of buyers who have the financial wherewithal to complete the deal.  While I recognize that if fewer buyers are capable of completing a deal and the reduced demand can constrain the ultimate value a seller can receive, that’s a function of supply and demand, relating more to investment values than fair market value.

I’d like to also point out that for attractive properties, we have seen buyers more than willing to ante up additional equity to bridge any shortfalls in debt financing to complete a deal.  This has been particularly true for Private Equity buyers who have a surplus of capital to invest that they still want—and need to—deploy.

From a practical perspective then, as investment bankers who specialize in middle market health care services, we have not yet seen a slowdown in deal flow, nor have we seen a reduction of multiples, which, for our most attractive sectors, remain in the 6-10 times EBITDA range, or more.  More equity?  Yes.  More creative sourcing of debt?  Absolutely.  But a reduction of values?  At least not yet.

If you would like to send your comments about observations of market multiples, please email Dexter at dbraff@thebraffgroup.com

About The Braff Group

The Braff Group is the leading investment banking firm specializing in the home health care, hospice, infusion therapy, specialty pharmacy, health care staffing, and home medical equipment market sectors.  The firm provides an array of transactional advisory services including sell side representation, debt and equity recapitalizations, strategic planning, and valuation.  Since being founded in 1998, The Braff Group has completed more than 115 transactions.  In 2006, the firm was awarded Healthcare Deal of the Year by the M&A Advisor, a leading publication dedicated to middle market merger and acquisition activity, for its representation of Canadian Valley Medical Solutions – the third consecutive year The Braff Group received this award.  The firm was also recognized as a finalist for Boutique Investment Banking Firm of the Year in 2005, 2006 and 2007.  Additionally, the firm has been honored as one of the fastest growing companies in the Pittsburgh Region by the Pittsburgh Business Times

Contact:

The Braff Group
Dexter W. Braff
888-922-5169
www.thebraffgroup.com