- 35 -
"implied working capital" (estimated as 4 percent of net revenue,
in accordance with industry standards, or $416,46224) and (ii)
fixed assets (Narvco's $1,156,733 appraised value), producing an
estimated value for SWMG's intangible assets of $2,515,255. Mr.
Dutcher further opined that SWMG's intangible value represented a
"bundle" of intangible assets, including "assembled workforce,
patient records, provider contracts, trademarks and tradename,
and practice goodwill".25
For purpose of allocating the $2,515,255 value for SWMG's
intangible assets to the 29 SWMG physicians, Mr. Dutcher simply
adopted the same formula devised by Dr. Levin. The Dutcher
appraisal offered no analysis of the appropriateness of Dr.
Levin's formula.
The business enterprise value of SWMG as estimated in the
Houlihan and Dutcher appraisals differed by only 2 percent
24 In Mr. Dutcher's view, substituting an amount for
"implied working capital", based on industry standards, instead
of measuring actual current assets and liabilities, provided a
more accurate measure of the business enterprise value of a going
concern, since the level of current assets and liabilities
fluctuates greatly.
25 In Mr. Dutcher's view, the goodwill of a medical or other
professional practice consists of "practice goodwill", which is
associated with the entity, and "professional goodwill", which is
associated with the individual. According to Mr. Dutcher, the
practice goodwill of a medical practice generally consists of
such items of value as patient records, provider contracts,
assembled workforce, trademarks and tradenames, and going concern
value. Professional goodwill, in his view, "results from the
charisma, knowledge, skill, and reputation of a specific
practitioner", is not transferable, and has no economic value.
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Last modified: March 27, 2008