CASE 30 ST. BENEDICT’S TEACHING HOSPITAL MERGER ANALYSIS

1. What is the impact of operational changes (both hospitals have “mercy flight” helicopters and full ED services) on revenues and costs and hence on the net cash flows that Lafayette General’s assets can produce?

2. Once the consolidation takes place and all synergies have been realized, what is the long-term growth prospect for Lafayette General’s cash flows?

3. What impact would the acquisition have on St. Benedict’s own cash flows? Any change in St. Benedict’s revenues or costs that results from the acquisition must be included in the analysis.

4. What is your estimate of Lafayette General’s value using the market multiple valuation technique? What are the strengths and weaknesses of this technique both in general and as applied in this situation? (Remember that there are two bases for this approach—EBITDA and number of discharges.)