EBITDA Multiples — Dental Products

• Brocair Partners, a financial adviser for healthcare companies, estimated (by analyzing over 80 recent transactions) that the median EBITDA multiple in the dental products industry is at 16.9.
• The Brocair Partners report also found that its index of companies operating in the dental products industry "has risen 148% compared to a 46% increase in the S&P 500" over the past five years.

Revenue Multiples — Dental Products

• The same report from Brocair Partners also identified the median revenue multiples for companies in the dental products industry. The median revenue multiple is 2.4.
• The report also noted that the most recent median revenue multiples are 4.4, but that the figure is probably skewed because the recent transactions "mask significant differences in multiples depending on the market segment within the industry."

Revenue and EBITDA Multiples — Orthopedics

• Mercer Capital identified the 2017 trailing last-ten-month multiples for transactions in the orthopedic industry in its 2018 Medical Device Industry Report.
• The revenue multiple determined by Mercer was 3.44, while the EBITDA multiple was 16.3.
• Mercer Capital also explained that companies in the medical devices industry tend to have high multiples because their products are usually protected by patents and the industry tends to have high research and development costs.

EBITDA Multiples — Medical Devices

•  Stout found that EBITDA multiples in the medical devices industry have been increasing over the past five years. It estimated that The EBITDA multiple for the industry is currently at 19.
•  IMAP identified multiples for mergers and acquisitions transactions in the European medical device industry. The median EBITDA multiple was determined to be 14.
• IMAP's findings are not particularly relevant here because, as Mercer Capital noted, healthcare companies in the US tend to have higher multiples than their European peers. However, the report did conclude that multiples for small and medium enterprises (SMEs) tend to be about 15% lower than those for listed companies. This could be relevant for determining the valuation for a private company.

Dental Products Multiple Valuation — Remarks

• The previous response found several EBITDA and revenue multiples for industries similar to the one Remedient Biomed Technologies plans to operate in (orthodontic devices).
• Out of all previously identified multiples, the multiples estimated by Brocair Partners are most relevant for determining the year 2 valuation of Remedient Biomed Technologies. This is because the Brocair Partners report is the most recent one (April 2019), and it provides the multiples for the closest industry (dental products).
• Unfortunately, most, if not all, transactions used by Brocair Partners to estimate the multiples are public companies. Private companies are generally valued lower than public companies because of the higher risk involved in the transaction.
• To circumvent this limitation, two different sources have been identified that provide a comparison between multiples for private and public companies.
• IMAP stated in 2019 that, for European companies, multiples for small and medium enterprises (SMEs) tend to be about 15% lower than those for listed companies in the medical devices industry.
• An article published by the Financial times in 2018 found that "investors paid on average 12.5 times [EBITDA] multiples for private companies", compared to "16.8 times multiples paid for public companies." This means that multiples for all private companies were 25.6% lower (1 - 12.5 / 16.8 = 25.59) than for public companies, regardless of industry.
• The IMAP's report is based on more recent data, and it is analyzing an industry that is a closer fit (medical devices). Therefore, the 15% figure will be used to discount the valuation for Remedient Biomed Technologies. Even though IMAP analyzed transactions of European companies, valuations of US healthcare companies tend to be higher than those for their European peers, as Mercer Capital noted.

Remedient Biomed Technologies — EBITDA Multiples Valuation

• The projected EBITDA (net pre-tax income) for year 2 of Remedient Biomed Technologies' operations is $10,311,740. 
• The median EBITDA multiple in the dental products industry is at 16.9, according to Brocair Partners. Therefore, Remedient Biomed Technologies is likely to be valued at $174,268,406 ($10,311,740 * 16.9 = $174,268,406) after its second year of operation.
• However, since Remedient Biomed Technologies is a private company, this valuation needs to be discounted by 15%, as explained above. The final valuation for Remedient Biomed Technologies, using the EBITDA multiple approach, is $148,128,145 ($174,268,406 * (1 - 15% = $148,128,145)).

Remedient Biomed Technologies — Revenue Multiples Valuation

• The projected revenue (sales) for year 2 of Remedient Biomed Technologies' operations is $19,076,184. 
• The median revenue multiple in the dental products industry is at 2.4, according to Brocair Partners. Therefore, Remedient Biomed Technologies is likely to be valued at $45,782,842 ($19,076,184 * 2.4 = $45,782,842).
• Applying the 15% discount rate for private companies again, the final valuation for Remedient Biomed Technologies, using the revenue multiple approach, is $38,915,415 ($45,782,842 * (1 - 15% =$38,915,415)) after its second year of operation.