Private equity interest in buying ophthalmology practices is accelerating across the US. This interest has created a fundamental shift in how practice owners should think about the future of their businesses. As a result, many physicians are unclear or even confused about how these partnerships unfold and what makes a strong candidate for private equity investment. As this ophthalmology acquisition wave continues to build, we seek to dispel some of the common myths surrounding the new M&A landscape.
As 2018 begins, physician-owners are developing strategic plans and examining their long-term options. More and more, the importance of private equity’s interest in specialty medical practices and surgery centers is being considered and discussed by physicians throughout the United States. What is going to happen in 2018? Should I consider a sale to private equity? How do these transactions work? Is private equity my best long-term option? Is this the best time to make a deal?
Many interested physicians ask me how private equity investments in ophthalmology will play out over the coming years. We now know that consolidation is happening, but how will it work? Why are PE firms interested? What kind of return on investment are they looking for? And what will it take to achieve that objective? This article will look at those items in detail and explore the financial mechanics from a PE firm's perspective.
The current consolidation wave in ophthalmology is still in its very early stages, but something changed in 2017. This year’s accelerated private equity investments confirmed our predictions of far-reaching, immediate impact across the specialty. The year 2017 has seen the heaviest investment to date, with eight major acquisitions completed as of November 1st.
EBITDA is a key component to the accelerating consolidation trend within specialty physician practices. It is the single biggest determinant in valuing practices, and subsequently the purchase price paid by private equity firms. But what does it mean? Officially, EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is intended to represent the firm’s actual pre-tax cash flow before financing and investing activities. Essentially, it is the cash flow that an acquirer is “buying” from the practice’s current owners.
Private Equity's recent interest in ophthalmology represents the biggest opportunity for physicians in decades.
Private equity firms have plenty of cash they need to invest. According to Bain & Company, PE has raised more than $500 billion each year since 2013. That money can't sit on the sidelines - it needs to be invested, and quickly. But in today's slow-growth, low-interest rate economy, PE firms need to be careful. They know the best investments are safe ones.
Private equity is buying physician practices and surgery centers, and its hunger for healthcare provider businesses continues to boom. Today, it was announced that KKR is acquiring Covenant Surgical Partners, a leading operator of ambulatory surgery centers and physician practices in ophthalmology and gastroenterology.
Your Best Move
You’ve probably heard it in the news or from your coworker next to you: Healthcare reform is coming. So far, 2016 has ushered in a wave of uncertainty, especially in the field of healthcare. Although the repeal of ACA has not seemed likely with the new Trump administration, healthcare workers should be wary of the possibility. Physician owners of ASCs are no different.
Private equity firms are showing increased interest in physician-owned assets including medical practices. This article dives deeper into how PE firms operate and what they hope to accomplish.
What are Private Equity Firms?
With the healthcare trend turning toward lower-cost services and specialization, physician-owners of profitable and successful ambulatory surgery centers (ASCs) and medical practices will soon be approached by buyers looking to
Physician-owners of ASCs are in a unique position to capitalize on new trends in the healthcare market. Buyers are looking to increase their value by picking up ASCs and physicians find themselves in a place to capitalize.
However, selling your ASC goes beyond the immediate proceeds that come with a sale. Selling your ASC ensures a continued stream of income and the opportunity to increase your value, even beyond retirement.