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assets; i.e., the income, cost, and market approaches. Wilhoite
rejected the cost approach as a means of valuing the Sta-Home
tax-exempt entities. He noted that the value of the Sta-Home
tax-exempt entities’ intangible assets was especially important
because the entities were service-based business with a
relatively low investment in tangible assets. He noted that the
Sta-Home tax-exempt entities’ intangible assets included
operating licenses, Medicare certifications, patient lists,
referral relationships, a trained and assembled workforce,
proprietary policies and procedures and trade name, and a going
concern value. He noted that the CONs had been subject to a
moratorium for the 12 years prior to the valuation date. He
noted that “health issues” prevented him from learning details
about the Sta-Home tax-exempt entities’ intangible assets from
the Sta-Home tax-exempt entities’ management and that much of
that information was simply not available.
He explained that several of the home health care agencies
acquired in recent transactions had incurred losses immediately
before their sale. He observed, however, that the purchasers of
those agencies still had paid considerable amounts to acquire
them. To Wilhoite, this factor indicated that the intangible
assets even of companies that showed losses were worth
considerable sums to potential acquirers. Moreover, it indicated
to Wilhoite that an examination of similar acquisitions would
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