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So,
Let's take a look at how Mednax executives gets rich by buying anesthesia practices:
They buy practice "X" for $15 million dollars. They borrow the money from Wall Street by issuing debt. The partners of practice "X" receive compensation upfront and Mednax gets control of the revenue stream.
Mednax cuts expenses by 3%, improves collections by 8% and does the internal billing.
The practice generates a net revenue and profit each year to Mednax. After paying the salaries of all the employees Mednax generates about $3 million in profits. Mednax has a P/E ratio of 20 which means Wall Street says the value of that profit is worth $60 million to Mednax. Each dollar of profit generates $20 of value to the company.
Mednax breaks even on the practice investment after 4 years but the net debt is held by the bond holders anyway. Alternatively, Medenax can issue new shares to investors in order to fuel acquisitions.
Recently, Karl Wagner (President of American Anesthesiology) sold $4.5 million of Mednax stock at a huge gain: http://seekingalpha.com/article/2211783-mednax-3-different-insiders-have-sold-shares-this-month
This thread proves Mednax, Sheridan, etc. will continue buying practices because the money is in the P/E ratio of the stock.
When a group sells out to Mednax the P/E ratio is 1 of that group (some premier groups do get a multiple however by acquiring stock options/shares immediately plus cash for the buyout) but Mednax gets a P/E of 20 immediately from the Street.
Let's take a look at how Mednax executives gets rich by buying anesthesia practices:
They buy practice "X" for $15 million dollars. They borrow the money from Wall Street by issuing debt. The partners of practice "X" receive compensation upfront and Mednax gets control of the revenue stream.
Mednax cuts expenses by 3%, improves collections by 8% and does the internal billing.
The practice generates a net revenue and profit each year to Mednax. After paying the salaries of all the employees Mednax generates about $3 million in profits. Mednax has a P/E ratio of 20 which means Wall Street says the value of that profit is worth $60 million to Mednax. Each dollar of profit generates $20 of value to the company.
Mednax breaks even on the practice investment after 4 years but the net debt is held by the bond holders anyway. Alternatively, Medenax can issue new shares to investors in order to fuel acquisitions.
Recently, Karl Wagner (President of American Anesthesiology) sold $4.5 million of Mednax stock at a huge gain: http://seekingalpha.com/article/2211783-mednax-3-different-insiders-have-sold-shares-this-month
This thread proves Mednax, Sheridan, etc. will continue buying practices because the money is in the P/E ratio of the stock.
When a group sells out to Mednax the P/E ratio is 1 of that group (some premier groups do get a multiple however by acquiring stock options/shares immediately plus cash for the buyout) but Mednax gets a P/E of 20 immediately from the Street.