“You can have a large, impressive business, but if it isn’t well run, its size won’t make up for that. A smaller business where everything is in order may be more attractive.”
Seven factors that determine the value of a healthcare business
For business owners considering a sale, it is helpful to have an estimate of their company’s value before starting the process. This can inform financial planning and help them decide whether now is the right time to sell. Valuation, however, depends on many different factors. Two healthcare businesses with similar profitability can therefore have very different valuations.
The range of multiples in healthcare
The purchase price of a business is often expressed as a multiple of its “earnings”. In healthcare transactions, this multiple varies considerably, from four to more than eight times normalized EBITDA. Four times is a realistic lower bound for a healthy small or medium sized business. Multiples of eight or nine times do occur, but they are exceptional.
Business owners can influence where their company falls within this range. For example, a smaller business that depends on one person is less attractive to a buyer than a larger business in which knowledge and responsibilities are shared among several people.
During the preparation phase, the Rembrandt project team conducts a thorough analysis of your business. Drawing on our market knowledge and comparable transactions, we can provide a well founded estimate of the multiples you can expect.
What a buyer considers earnings
The “earnings” to which the multiple is applied are normalized EBITDA. Normalizations may include one off costs, expenses that are not at market rates and costs relating to shareholders. The size of your management fee, for example, matters: a buyer will assume market rate compensation for your role. If your compensation exceeds that level, the excess is normalized, increasing EBITDA.
A buyer looks not only at past performance but also ahead. They assess your current and future earnings potential, which means historical results may carry less weight than you expect.
Another item buyers examine closely in healthcare is revenue received in advance. A childcare provider, for example, invoices one month ahead. Some healthcare providers have a similar balance sheet item because they receive advance payments from health insurers. This item can be treated in different ways, either as working capital or as restricted cash, affecting the value of your business.
Factors beyond your control
The healthcare segment in which you operate also affects the value of your business. Multiples tend to be higher in niches where private equity firms are active. Several parties are often interested in such businesses, and that competition is reflected in the price. The opposite applies in niches that depend heavily on government policy. Buyers have less certainty about what legislators will do in the coming years and factor that risk into the price.
Kiki Jacobs
Sector specialist Healthcare & Education
The value drivers behind a successful transaction
The value of a healthcare business depends not only on its EBITDA, but also on the risk that it may not sustain that level of profitability in the future. A buyer wants to know whether those risks are manageable, cash flows are predictable, the workforce is stable and knowledge can be transferred. Below are seven factors a buyer will consider when assessing your business.
1. Size
The size of a business, particularly its profitability, affects its value. A higher EBITDA has a direct effect, but it often also leads to a higher multiple. This is because risks are generally better managed in larger organizations. Take a business with five locations. It is practically impossible for you to manage all of them yourself, so the organization will already have become more professional as it grew. There is a management layer between you and the staff delivering care, processes have been documented because the business could not otherwise function, and operations continue if you are away for a week.
2. Location
The attractiveness of your location also matters. This depends on several factors that may pull in different directions: demand for care in your region and whether a buyer can find staff there. Which factor carries more weight varies by segment. For childcare, population growth is decisive, making a province such as Flevoland attractive. A buyer focused on an ageing population, by contrast, may find Limburg more appealing. A region that is less attractive in one segment may be attractive in another.
The labour market is often the deciding factor, and it can present a trade off. In central Amsterdam, for example, demand for childcare is high, but a buyer may struggle to find enough childcare practitioners. The same issue arises in dentistry: dentistry degrees are offered only in Amsterdam, Nijmegen and Groningen, with a combined 270 places each year. Practices in the far southwest can therefore find it harder to recruit dentists. Staffing shortages make a business less attractive to a buyer. This is much less of an issue in physiotherapy, because training programmes are available throughout the country.
A buyer will also look at its own network of locations. If your business is near the border in Zeeland or South Limburg and the buyer has no other locations nearby, it may be less attractive to them. It would not fit into their network or offer economies of scale. At the same time, plenty of buyers are already active in those regions and want to grow there, so much depends on which parties you approach.
3. Utilisation
When assessing utilisation, a buyer looks at several things. The importance of having enough qualified staff has already been discussed. Since enforcement of the Dutch Employment Relationships Deregulation Act (Wet DBA) resumed, it has also become important to ensure that your staffing arrangements are compliant. Do you still work with many self employed professionals who should in fact be employees?
How effectively you deploy your staff matters too. This is clearest in childcare, where occupancy above approximately 80 percent is considered good. In a dental practice, a treatment room should not sit empty for three hours. In home care, scheduling is crucial because travel time is not paid for separately. A team travelling from Amsterdam to Utrecht and then to Bussum therefore delivers less care with the same number of people.
For a buyer, the utilisation rate matters, but the reasons behind it matter more. If utilisation is low because it has not been actively managed, the buyer may see an opportunity to improve it after the acquisition. If it is low because the customers are not there, the buyer is acquiring a problem.
4. Management
A buyer assesses not only who is in charge, but also whether the management structure around them is sound. This carries more weight in healthcare than in many other sectors because the law sets requirements for governance and supervision. Since 1 July 2025, healthcare providers with more than fifty care professionals have been required to appoint an internal supervisor. Previously, the threshold was twenty five employees.
Your own role after the transaction is part of this assessment. Whether you will stay, for how long and in what capacity is discussed in every sale process. The same applies to your management team: site managers who have taken over day to day responsibilities make the business less dependent on you, which buyers view positively. This matters even more to a buyer combining multiple locations or businesses. An independently functioning management team is easier to integrate than an organization that relies on you personally.
5. Revenue quality
It is not just the amount of revenue that matters, but also its “quality”. Revenue secured by contracts is worth more to a buyer than one off revenue.
A buyer will also assess how dependent you are on one or a few customers. Do you generate most of your revenue from a single municipality, one insurer or one type of service? You may see that as a source of stability, but a buyer may see it as a risk.
6. Information availability
The quality of your administrative records largely determines how smoothly the sale process proceeds. Missing or poorly organized information can cause delays.
Due diligence is particularly important for healthcare businesses, not least because of the many contracts involved. Agreements with health insurers, contracts with parents, permits and government approvals must all be in order, and some may need to be transferred to another entity. If something is not in order, the deal may be put on hold until it is resolved.
“We do not approach potential buyers until the information is complete. That may take time upfront, but it prevents the process from stalling halfway through because you cannot answer a question.”
7. Retaining knowledge within the business
Does knowledge of your business rest primarily with you, or is it shared more widely across the organization? A business that relies entirely on your knowledge and relationships is vulnerable, and a buyer will factor that risk into the price. When knowledge and expertise are embedded throughout the organization, the business is easier to transfer to a new owner.
That is why we raise this in our first conversation. It gives you time to address the issue during the sale process, reducing the risk by the time a buyer comes to the table.
What a buyer ultimately assesses
These factors can reinforce one another, but they can also undermine one another. A large business without a management team, reliable figures or good utilisation will not necessarily be worth much more than a smaller business where everything is in order.
The value drivers often also explain why business owners decide to sell. It is usually not the healthcare services themselves, but everything involved in running the business. Staffing concerns and administration prompt many healthcare business owners to explore a sale. Retirement or a desire to work less comes second.
Wondering where your business stands?
Even if a sale is still some way off, it is worth thinking about it now. Starting your preparations early can pay off. The Healthcare & Education team would be happy to help you assess where your business stands and identify areas for improvement, even if a sale is not on the immediate horizon
About the author
Kiki Jacobs is a Senior Manager at Rembrandt M&A and a Healthcare & Education sector specialist. She joined Rembrandt M&A in 2017 and has gradually specialized in acquisitions in the healthcare sector. She advises business owners in areas including dentistry, physiotherapy, childcare, occupational health services and elderly care on the sale of their practice or organization. What drives her in this sector is that, for healthcare business owners, it is not just about the transaction. They also want to know: what will happen to my staff and patients after the acquisition?
CLIENT STORIES
A sale in the Healthcare & Education sector has its own dynamics, from sector-specific valuation issues to finding the right buyers. The business owners below share how they navigated that process with Rembrandt M&A.
