Promed

Sid Worley: MD Targeting an Strategic Acquisition for Expansion

J.Healy
Best Acquisition potential Well known and regarded in the World Not able to adjust to the market changes Losing business to Competitors including Promed. Believed to be in a financial crisis.

The stand
J.Healy would prefer not to sell to one of the other two major competitors ProMed s investors willing to fund any reasonable acquisition The latest accounts of J.Healy available were four months old. Annual Audit only gave the true values.

 Obvious shortfall year-to-date A recent announcement that the company had lost another large service contract. J. Healy s managing directors insisted that the company would achieve its forecast profit for the year of 580,000. J.Healy carried high level stocks.

 No cleaning out of Stocks at all. Doubt if the company had ever conducted a proper stock take. Lot of ways to improve the company.

New Business Model

Much of the first year involved taking substantial duplicate costs. Take excessive Healy overheads out of the company. No changes in working capital.

Price of the Deal

One simple rule: when you re the seller, you sell at eight times EBIT; when you re the buyer, you pay six times EBIT. EBIT(for 10 months) = 66,29,000 Approximately EBIT( for 12 months) = 79,55,000 Six times EBIT= 4,77,30,000

P/E Multiple
Compare with Smith & Nephew P/E : 14.9 Value of Equity= P/E Multiple * Earnings = 14.9 * 51,47,593.75 = 7,66,99,146.88

 Value of company= Value of Equity + Value of Debt = 7,66,99,146.88 + 52,48,000 = 8,19,47,146.88 BDO Stoy Hayward Private Company Price Index: 39% discount

Hence after 39% Discount, Value of J.Healy = 8,19,47,146.88 (1 39%) = 4,99,87,759.6

Price of a Deal
Comes down to
Presentation & Negotiation

Two factors affecting Price is

Level of Competition Motivations of or pressures on the seller

Thank you