Transactions between health care organizations come in all shapes and sizes. When transactions involve a not-for-profit (NFP) organization as either the buyer or seller, which comprised the majority of health care merger activity in 2012, there are unique valuation differences that must be taken into consideration.
Transactions involving NFP organizations are different from for-profit entities because NFP entities don’t have shareholders or individuals benefiting from the proceeds of a sale. When an NFP entity sells to another NFP entity, how the price is negotiated and where the proceeds (if any) go is quite different. When an NFP is involved in either side of the transaction, there are different considerations and legal requirements that must be met. This article examines the valuation considerations of the three potential transactions.
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