Valuation in Practice: How to Determine Fair Value When Partners Exit Healthcare Clinics and Companies
- Admin
- Jun 9
- 3 min read
Avoiding conflict, ensuring fairness, and preserving business continuity are key goals of a well-executed valuation during a partner's exit. Learn how to apply practical, healthcare-appropriate methods to determine fair value.
In medical and dental clinics, laboratories, and other healthcare businesses, a partner’s exit is a critical moment that can trigger disputes, affect the company’s reputation, and financially destabilize operations. That’s why valuation—assessing the true value of the business—becomes a strategic tool, essential to ensuring fairness among parties and safeguarding the organization’s future.
More than just a mathematical formula, valuation must reflect the actual performance of the business, its cash flow potential, partner dependencies, and both tangible and intangible assets. When poorly conducted, it can result in unfair agreements, legal disputes, and even operational breakdowns.
Why Is Valuation Critical During Partner Exits?
When a partner leaves—whether by choice, retirement, conflict, or death—the value of their share must be determined accurately and impartially. This prevents disagreements and protects the interests of the remaining partners and the business itself.
In the healthcare sector, this process is particularly sensitive due to intangible assets such as patient base, professional reputation, contracts with insurance providers, and clinical know-how. Furthermore, the dependency on the exiting founder or clinical director can directly impact future profit projections.
Case example:
An ophthalmology clinic with an annual revenue of R$2.4 million needed to determine the value of a 40% ownership stake of a departing partner. The valuation considered EBITDA multiples, the active patient base, growth potential, and the impact of the doctor’s exit on future income. The final negotiated value was based on a discounted cash flow (DCF) model that excluded the partner.
Valuation Methods Commonly Used in Healthcare Businesses
The most widely used methods in practice include:
Discounted Cash Flow (DCF):The most comprehensive method, it factors in future profit projections adjusted for business risk. Ideal for clinics with strong financial records and stable operations.
Market Multiples (EBITDA or Revenue):Useful for quick estimates or when comparable market data is available. Similar clinics are typically valued at 3x to 5x EBITDA.
Asset-Based Valuation:Best suited when fixed assets (equipment, real estate, infrastructure) are significant. While limited in scope, it may be relevant for clinics with substantial physical assets.
In many cases, a combination of these methods is used to achieve a more accurate and defensible valuation during negotiations or mediations.
Healthcare-Specific Factors That Influence Valuation
Patient base and loyalty
Technical dependency on the exiting partner
Contracts and agreements with insurance providers
Future earning potential
Tax compliance and legal risk exposure
Well-drafted agreements, including exit clauses, non-compete terms, and periodic valuation provisions, help reduce conflicts and provide legal protection for all parties involved.
Governance and Succession Planning: Prevention Over Cure
Ideally, the business valuation should be periodically updated and documented in the corporate agreement, with clear terms for entry and exit of partners. Having a structured partnership agreement with defined valuation criteria is a best practice for clinics aiming for secure, scalable growth.
Practical tip:
Include a clause in the company’s bylaws requiring the business to be revalued every two years using at least two different valuation methods. This improves decision-making and reduces the likelihood of future legal disputes.
Conclusion
Determining the fair value of a healthcare business when a partner exits requires more than formulas—it demands insight, precision, and strategic thinking. A well-executed valuation not only avoids conflict but also ensures business continuity, honors the collective effort invested in the enterprise, and strengthens corporate governance. For clinics aiming to remain competitive and sustainable, regular valuation should be part of their ongoing strategic planning.
