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Is contract important for medical alert and PERS  
May 28,  2021
Is contract important for medical alert and PERS
          I listened to a webinar presentation the other day on Medical Alert monitoring service featuring business consultants familiar with valuation and sale of medical alert businesses and accounts.  I was surprised to hear that the consultants seemed to suggest that contracts were important, but not that important. Maybe I heard that wrong.  I also heard that the medical alert business are evaluated using EBITDA, not RMR.
          I have to question both positions.
          First contracts.  Medical alert monitoring services is included in the category of PERS, personal emergency response service.  Not all PERS is medical alert, but all medical alert is included in the definition of Pers. Many alarm companies offer PERS, including medical alert monitoring.  Companies that offer only medical alert monitoring are not, however, traditional alarm companies and they do not have to have an alarm license in those states that require alarm companies to have a license.  Medical alert is not typically included in the definition of alarm business or alarm system.
          Medical alert and PERS becomes intrinsically intertwined when the medical alert device can be used to signal a panic or non-medical emergency signal. 
          Medical alert and PERS claims against alarm companies, and medical alert companies, are not uncommon.  The claims are typically for lots of money and do involve death as well as serious personal injury. 
          No medical alert company, no professional monitoring center and no alarm dealer offers medical alert or pers without a written contract that provided all the contractual protection available to the alarm industry or medical alert industry.
          No potential buyer of medical alert accounts or business would consider making that purchase if the selling company didn’t have proper contracts.
          Valuation:  Without contracts there is no valuation, not one that matters in any event.  No point using EBITDA or RMR because no contract is a non-starter.  But the consultants focused on cost of creation of accounts, attrition and EBITDA.  Unless it’s a stock purchase, which would be rare except in the largest deals, why does a potential buyer care about cost of creation or EBITDA?  Sure the potential buyer wants to be sure that the charges to customers is customary and sufficient to offset the cost of monitoring, a potential buyer should be incorporating the seller’s operation into the buyer’s operation.  Buyer needs to be concerned only with additional cost of operations, not the seller’s costs.  This is why the RMR valuation is just as good for medical alert as it is for burglar and fire alarm contracts.  Cost of creation and cost of operation experienced by the seller is of little concern to the buyer; the buyer won’t have those expenses; all buyer has to do is hold onto these accounts long enough to turn a profit on the purchase. 
          Maybe I missed something.  Contractual protection is as important as term of contract or expectation of retention of the customer, and this is how alarm and medical alert companies are valued.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301