Global BV news: Global trademark values for hospitals

BVWireIssue #162-3
March 16, 2016

Reputation is very important for providers of medical services. Yet the value of trade names and brands in the healthcare sector has received little public attention. A peer group analysis from Markables illustrates trademark comparable data for 35 hospitals from nine countries. In this sector, trademark royalty rates range from 0.4% to 1.8% on revenues, with a median rate of 0.9% (see chart). Based on these royalty rates, trademarks account for approximately 6% of enterprise value. Average enterprise value multiples for the sector are 1.2x revenues.

Three drivers: Hospitals have many different business approaches and positioning, according to the analysis. Apparently, the value of a hospital’s name and brand has three major determinants. First, health benefit plans must give patients the freedom to make their own choices of healthcare providers. Second, the type of treatment must allow freedom of choice. Acute care often requires treatment nearby, so there are fewer options than for planned treatment. And third, there must be choices among different hospitals offering the same services in an acceptable proximity. The more regulated the sector, the lower the value of the hospital’s trade name. Fully private clinics in countries like Switzerland, Singapore, or UAE often attract international patients and can easily achieve brand name royalty rates of 5% on revenues.

Markables, based in Switzerland, now has a database of over 8,200 trademark valuations published in financial reporting documents of listed companies from all over the world. The database reports value solely for the use of trademarks (not bundled with other rights).

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