Situation
A private healthcare group operating two hospitals and three specialist clinics in Baghdad had attracted interest from a regional PE firm. Revenues were USD 7.8 million but EBITDA was distorted by opaque intercompany transactions and cash-basis accounting. The PE firm had issued a formal information request the group was unable to fulfill within 90 days, halting the investment process.
Complication
Financial statements were on a cash basis, rendering EBITDA non-comparable to the IFRS standards required by the investor. Intercompany transactions with a family-owned pharma subsidiary were undocumented with no transfer pricing rationale. Clinical KPIs had never been systematically collected. When I first reviewed the underlying records, I found that two of the three specialist clinics were operating at a loss masked by intercompany cost allocations. That finding was not in the seller's materials. Disclosing it would reduce the headline valuation. Concealing it would destroy credibility the moment the PE firm's own due diligence found it.
The Critical Decision — What Almontather Rassoul Saw and Did Differently
I had a direct conversation with the managing director about the clinic losses before any PE communication. He initially asked me to exclude the two clinics from the information memorandum scope. I refused. My position was that selective disclosure in a PE process does not survive due diligence, and when it fails it does so in the worst possible way — after trust is established and before funds are committed. I proposed including the clinics with a clear turnaround narrative and a costed operational improvement plan. The PE firm later identified the clinic performance independently and commented explicitly that the transparent disclosure had increased their confidence in the quality of all other information in the memorandum.
Methodology — Why This Approach and Not Another
I chose a normalized EBITDA bridge as the central valuation construct rather than a revenue multiple approach because the business had too many non-recurring and intercompany distortions for a simple multiple to be credible. The bridge made every adjustment visible and auditable — the correct approach for a first-time PE process where the client needed to demonstrate financial discipline they had not previously demonstrated.
Resolution — Delivered by Almontather Rassoul / MRC Firm Ltd.
Three years of financial statements restated to accruals basis. Intercompany transactions documented and arm's-length priced with a transfer pricing memo. A clinical operations dashboard covering 18 KPIs built across both hospitals. A five-year financial model with three stress-tested growth scenarios. A full Information Memorandum produced to regional PE standards. The two underperforming clinics were presented with a costed turnaround plan that became part of the investment thesis. I personally represented the company in pre-LOI discussions, structured the data room, and managed the Q&A process across four rounds of investor queries.
What Was Not Fully Resolved — and Why
The final investment was completed at a pre-money valuation of USD 14.2 million, at the lower end of the range projected. The discount reflected the investor's risk pricing of the two underperforming clinics. The full range would have been achievable had the clinics been profitable. The turnaround plan for those clinics is currently in execution under MRC's post-investment advisory mandate.
“Rassoul insisted on disclosing the clinic losses when we wanted to exclude them. The PE firm told us afterward that the disclosure was the reason they trusted the rest of the document. That decision cost us two million dollars on the valuation and saved the deal.”
— Managing Director, Baghdad Healthcare Group
Consultant: Almontather Rassoul, PhD · MRC Firm Ltd. · montather-rassoul.com · linkedin.com/in/montatherrassoul