HOSPITAL VALUATION TO DETERMINE THE OPTIMAL ACQUISITION PRICE

• Main Author: Elang Yogantara, Satya
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/85869
• Institution: Institut Teknologi Bandung

This study evaluates the financial and strategic viability of acquiring a hospital in Bandar Lampung by SMI Ltd., a newly established healthcare company. The research utilizes a comprehensive financial analysis, including Discounted Cash Flow (DCF) valuation, to determine the Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback Period (PBP) of the proposed acquisition. The external environment is analyzed using the PESTEL framework, highlighting key factors that make the hospital industry attractive for investment. Internal factors are assessed through VRIO analysis, which is used to identify and evaluate the hospital's unique resources and capabilities that make it an attractive acquisition target. The results indicate that the acquisition is financially viable, with an NPV of Rp. 7,033,579, an IRR of 14.35%, a PI of 1.08, and a PBP of 5 years and 11 months. Although these results suggest that the acquisition is financially feasible, the IRR only marginally exceeds the required rate of return, indicating limited financial attractiveness under the initial offer price. To address these concerns and enhance the investment's financial viability, the analysis proposes a revised acquisition offer price of Rp 35,550,800,000. This adjustment reduces the total investment cost to Rp 54,550,800,000. leading to improved capital budgeting outcomes, including a higher IRR of 16.71% and a shorter PBP. The Monte Carlo simulation results show an almost 95% probability of achieving a positive NPV, with an 85% probability of achieving the DCF result. Sensitivity analysis identifies twelve critical factors affecting the valuation, including BOR, LOS, patient volumes, rate increases, acquisition costs, capital expenditure, cost of revenue, operating expenses, and WACC. The study concludes that the hospital acquisition is financially viable with the revised offer price, meeting SMI Ltd.'s target of a 16.5% IRR. Strategic recommendations are provided to optimize the acquisition price and enhance the overall valuation, including thorough negotiations to secure a lower purchase price, efficient management of operational costs, and the implementation of targeted marketing strategies to boost patient volumes. These measures are essential to ensuring the long-term financial sustainability and success of the acquisition.