Pulse Health Group (ASX:PHG) has made its entry into the mental health market with acquisition of The Hills Clinic in north-west Sydney for an initial payment of $27.7 million.
The Australian mental health market was worth an estimated $6.9 billion in 2010-11, with demand for and use of mental health services anticipated to grow by as much as 6% to 7% per year over the next 15 years.
This is the company’s third transaction in the past year following the e acquisition of Mackay Rehabilitation Hospital in June 2014 and the development of the Gold Coast Surgical Hospital announced in November 2014.
Vendors of The Hills Clinic are eligible to receive additional capped earn-out payments, subject to achievement of FY15 and FY16 revenue targets.
This includes a first payment of up to $2.3 million for FY15 and a second payment of up to $3.6 million for FY16, if revenue targets are met.
If the FY15 and FY16 targets are met, maximum consideration of $33.6 million would reflect an EBITDA multiple below 8.5x at FY16.
The Hills Clinic has 59 beds and incorporates a recently opened specialised young adult ward for 16-25 year olds, known as YA@theloft.
It recorded EBITDA of $3.2 million for the 12-month period to 31st March 2015.
