Private equity firms usually create a subsidiary Practice Management Company within their portfolios to acquire and manage dermatology practices and ASCs. Most transactions include some equity ownership in that company, as part of the total consideration sellers receive.
PhysiciansFirst expects several key developments in 2019. Most importantly, we anticipate increased acquisition momentum – both from new entrants and existing companies as they grow and enter new geographies. At the same time, some of the current investor pool will merge. Companies that have been unable to grow at their desired pace will likely combine with larger, more successful enterprises.
These days, many dermatology practices are faced with the challenge of securing their next generation of physician partners. Historically, practices brought in dermatology “associates” soon after residency or fellowship, and these associates immediately set their sights on the path to partnership. Although partnership was never guaranteed, it was expected to both reward physician loyalty and, more importantly, ensure practice continuity.
Many interested physicians ask me how private equity investments in dermatology 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.
If you have been paying attention to events in the dermatology world, you are well aware of private equity's increasing interest in dermatology practices and surgery centers across the United States. The details of individual acquisitions are frequently announced. But what does the big picture look like?
The team at PhysiciansFirst Healthcare Partners conducted extensive research to understand where these investors are acquiring and what this consolidation wave looks like across the nation.
The past several years have seen private equity’s tremendous impact on dermatology practices, surgery centers, labs, and aesthetic businesses. We view this consolidation cycle as beginning in 2011 with Audax Group’s recapitalization of Dr. Matt Leavitt’s large Florida practice, which had already been extensively developed on its own. Years 2012 through 2014 saw limited investment activity with other early adopters, notably Candescent Partners and Prairie Capital, acquiring their own platforms in 2012 and 2013, respectively.
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?
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 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.
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