Why PE buyers seem to pay so much more for medical practices

In recent years, private equity (PE) purchases and roll-ups of physician practices have gotten a lot of attention in the media and in physician circles, mainly because of the opportunity they represent for physician owners to sell their businesses for attractive prices. In fact, if you're in a market where PE buyers are on the hunt for practice acquisitions, some of the selling prices you've heard might seem almost unbelievable. At least, they might if you're familiar with the prices sellers can expect when selling to another practice owner, larger group, or, perhaps especially, a hospital. A sale to private equity can definitely be financially rewarding. As I write this, I have just finished helping a client through the entire process of evaluating PE buyers, presenting his practice, negotiating a solid deal with his preferred buyer, and navigating the complexities and details of due diligence. The entire process took the better part of a year, but I'm happy to say that my client was rewarded for all the hard work of building his practice over many years—and not just with an impressive financial return. He also secured a promising future for his practice and his employees. It can be done! But if you're contemplating selling and wondering if those big numbers you've heard mean you should only focus on PE buyers, there are a few distinct features of PE deals that can help explain, at least partly, why the prices are higher than offered by other buyers. These differences are important to understand and consider as you contemplate an exit strategy for yourself and your practice. Comparing PE offers you're hearing about to transactions involving other types of buyers, price alone might not yield an accurate, apples-to-apples comparison. A PE sale might offer more potential upside, but there will be conditions to the deal that differ from a more typical business sale—conditions that affect how much a seller can actually expect to net. You'll want to factor these into your analysis of your options. Here are three common features of PE deals that drive their offers higher than other types