• Eric J. Yetter

Selling Your Physician-Owned Practice After COVID-19

Our sources indicate the number of physician owners considering a sale to a private equity backed company, health system, or other MSO has tripled since the COVID-19 shutdown began. Physicians considering a sale ask us … “Did I miss the window of opportunity?" ... “Are the deals going to be as good as they were before the pandemic?”

To help frame the situation, we see five factors every physician owner should consider now:

  1. Strong buyer demand continues. The inherent demand for specialty medical services remains. Investors understand this relative to other investment alternatives and have confidence businesses will recover.

  2. Every transaction is unique and dependent on the specific fundamentals of the selling practice and the purchasing organization.

  3. We are confident investors will give sellers “credit” for the COVID-19 shutdown – adjusting financial performance or looking at other periods when valuing a practice or ASC.

  4. Important operational markers and transaction fundamentals have been disrupted or changed significantly, which will complicate negotiations and contract agreement.

  5. Recovery from the shutdown disruption will be a new factor when determining practice or surgery center value.

In situations like these, how well transactions in process hold up is an important indicator. Are they abandoned within a fragile ecosystem or maintained with confidence?

We currently have a healthy portfolio of transactions in process and have experienced continued commitment to execute, with a reasonable pause to navigate the current operational challenges faced by both buyers and sellers. But now practices are opening, and elective surgeries are resuming in many parts of the country. More will follow. Physicians are working hard to protect patients and run their businesses, essentially restarting a complicated machine within a fragile environment.

We are fortunate to have a unique view of the market from many different perspectives. That tends to reveal its underlying strengths and vulnerability and many times brings some clarity to a future that looks uncertain.

We expect a resurgence of deal volume in the second half of 2020 and into 2021. As the old saying goes, “Hindsight is 20/20”. We believe now is an excellent time for physicians to explore a potential sale and gain a strong understanding of a transaction process that typically takes 9-12 months.

The timing could be ideal.

This post is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, 127 Capital, LLC (“Physicians First”) and Ashland Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Certain Principals of Physicians First are registered representatives of Ashland Securities, LLC Member FINRA, SIPC. Physicians First and Ashland Securities, LLC are separate and unaffiliated entities. Securities and Investment Banking Services are offered through Ashland Securities, LLC.