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Mar 4, 2019 — Fully Paid off Equipment, Lucrative, Hard to Get NY, NJ Licenses
This is a full-service clinical lab established in 2010 in NY. It provides a variety of clinical tests from blood and urine including diagnostic tests in the NY and NJ area. Both NJ and particularly NY licenses for running labs in those states are not easy to get. From start to finish, it can easily take over 18-24 months to get NY license. As the insurance reimbursements are getting squeezed, the Lab has decided not to be in network with private insurances and not to accept any federal work (Medicare and Medicaid). As a result, it purposely focused on higher paying, but relatively lower volume work and mainly from the pain management physicians who would send them toxicology samples, and also some blood samples. The lab only performs the samples from cash patients and from private insurance patients and sends the federal samples to an outside reference lab.
In 2018, one of its referring sources wanted its service providers to accept Medicaid insurance as a requirement to be in their network. The Lab opted not to do it because the Medicaid pays very little for the services and additionally it is almost impossible to get into some of the NY Medicaids. As a result, the Lab’s revenues dropped significantly, from $6M in 2017 to a projected $4M in 2018 (projected from 9 months of 2018), as this referral source was roughly 1/3rd of their business.
The Lab is still extremely profitable, and the buyer can decide how best to run its business. Buyer may decide to accept Federal insurances and be in network with private insurances. The Lab can handle a much larger load than it currently runs (about 1,000 mostly toxicology samples per month) and it also has room to expand.
The Lab comes with fully paid-off equipment and significant- build-out improvements (about $2 M in equipment and about $600K in build-out and property improvement. It is in an excellent location on a busy but suburban type of street with plenty of parking in the building’s parking lot. Its 3,750 sq. ft. of spacious space on the ground floor, will allow for more equipment if necessary and the building has plenty of open space. And the Hospital is only a mile away and so there are plenty of referring physicians nearby for a motivated buyer with a strong sales force.
One of the two partners who own the Lab is not quite well and so the partners are looking to divest the business.
The table below shows summary view of the past three years financials. More details are shown in the following pages.
(Proj from 9 months) 2017 2016 2015
GROSS REVENUE $4.04M $6.02M $7.94M $5.05M
ADJUSTED EBITDA $1.04M $1.63M $4.79M $848K
Asking price is at $4M, a fair multiple of EBITDA and also considering that:
- It is a turn-key lab with very hard to get NY and NJ license
- It is very profitable
-There is no debt. Comes with almost $1.5M worth of completely paid off equipment
- Excellent lab space with opportunity for expansion
- Opportunity to expand the business by taking on federal insurances if the buyer so wishes