Specialist Care Home Valuation: What Your Learning Disability or Mental Health Service Might Be Worth
- Eclipse Corporate Finance
- Jan 2
- 3 min read
Updated: Aug 23
How Are Specialist Care Homes Valued?
A guide to understanding the valuation process for residential care homes supporting individuals with learning disabilities or mental health needs
If you're considering selling your care home, understanding how it's valued is the critical first step. Whether you operate a single residential setting or a multi-site group, the same core principles apply.
This guide outlines how buyers and investors approach a specialist care home valuation and how owners can prepare to achieve the best possible outcome.
What Drives the Valuation of a Specialist Care Home?
Specialist care homes are typically valued using an earnings multiple approach, based on a company’s underlying EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation). This is not just your profit as shown in your accounts, it’s an adjusted figure that reflects the sustainable profit a buyer can expect to inherit.
Example: A business with an underlying EBITDA of £500k and a multiple of 7x could achieve a valuation of £3.5m.
How to Maximise Your EBITDA
Presenting a credible and well-supported EBITDA figure is vital. Buyers will look to adjust your reported figures and so should you.
Key adjustments may include:
Director or shareholder salaries that won’t continue post-sale
One-off professional fees (e.g. legal or refinancing costs)
Costs relating to personal benefits (vehicles, memberships, etc.)
Pro-forma profits from new beds recently brought into operation
Synergy savings available to the buyer (e.g. overhead reductions)
Owners should ideally present a run-rate EBITDA based on recent months of trading, which often reflects the most up-to-date picture of business performance.
What Earnings Multiple Will You Achieve?
Earnings multiples in the specialist care sector can range from 5x to over 10x, depending on the profile of the business. Several key factors will influence the multiple applied:
1. CQC Ratings
“Good” or “Outstanding” homes achieve stronger valuations. Homes requiring improvement can significantly lower the multiple.
2. Fee Levels & Acuity
Higher average weekly fees and greater care complexity increase buyer interest and justify higher multiples.
3. Occupancy Levels
Consistent occupancy above 85–90% signals operational strength. Underperforming homes may face valuation discounts.
4. Staffing Ratios & Costs
Businesses with high staff retention and low agency usage are more attractive. Labour cost efficiency is a key metric.
5. Property Ownership
Freehold assets typically command significantly higher values than leasehold homes. Poor property condition or required capex will reduce value.
6. Business Scale
Larger groups tend to achieve higher multiples, especially where synergies or platform value exists.
Illustrative Valuation Examples
Business Profile | Likely EBITDA Multiple |
Single home, RI/Good rating, EBITDA margin <15% | 5–6x |
Small group (4 homes), all rated Good | 7–8x |
Large group (10+ homes), all rated Good/Outstanding, EBITDA margin >25% | 10x+ |
Note: Leasehold homes may see a 2x multiple reduction compared to freehold equivalents.
What Does "Cash-Free, Debt-Free" Mean?
Almost all share sales are structured on a cash-free, debt-free basis, with a normal level of working capital. This means:
You keep any cash in the business
You repay any debt in the business
An adjustment is made if working capital is above or below the normal average
These calculations can make a material difference to your final sale proceeds and should be carefully reviewed with your advisor.
Thinking of Selling?
Understanding the valuation mechanics is the first step. The next is preparing your business to present at its best.
At Eclipse Corporate Finance, we specialise in selling healthcare businesses, with significant experience in advising specialist care groups.
If you’d like a confidential conversation about your options, get in touch.
A PDF copy of our valuation guidance can be downloaded below:
Further details on how we can support you in selling your business can be found by following the link below.