Practice Growth13 min read

    Preparing Your Practice for Private Equity: A Physician's Guide

    Private equity interest in physician practices is at all-time highs. Whether you're curious or actively considering, here's what you need to know about the process and preparation.

    Peter Kemp•Managing Partner
    13 min read

    Preparing Your Practice for Private Equity: A Physician's Guide


    Private equity firms invested over $200 billion in healthcare in recent years, with physician practices remaining a top target. Here's what the process looks like from the physician's perspective.


    Why PE Is Interested in Your Practice


    What Makes Practices Attractive

  1. Recurring revenue Patients keep coming back
  2. Fragmented market Opportunity to consolidate
  3. Efficiency gains Room to improve operations
  4. Multiple arbitrage Small practice multiples → platform multiples
  5. Cash flow stability Healthcare is recession-resistant

    6. What PE Is Really Buying

  6. Your patient relationships
  7. Your referral network
  8. Your clinical reputation
  9. Operational improvement potential
  10. Add-on acquisition opportunities

    11. The Preparation Checklist


    Financial Readiness (12-24 months before)

  11. Clean, accurate financial statements (ideally reviewed or audited)
  12. Normalized EBITDA calculation
  13. Documented physician compensation
  14. Clear understanding of owner benefits and add-backs
  15. Separated personal and practice expenses

    16. Operational Readiness

  16. Documented workflows and SOPs
  17. Strong management team (or clear plan)
  18. Clean compliance record
  19. Updated payer contracts
  20. Modern technology infrastructure

    21. Legal Readiness

  21. Clean corporate structure
  22. Updated employment agreements
  23. Resolved litigation
  24. Proper licensing and credentialing
  25. Real estate ownership clarity

    26. Understanding Valuation


    The EBITDA Multiple Game

    Practice valuations are typically expressed as multiples of EBITDA:

  26. Small practices (1-3 docs): 3-5x
  27. Mid-size (4-10 docs): 5-8x
  28. Large/specialty: 8-12x+

    29. Calculating Your EBITDA


    Start with net income, then add back:

  29. Owner compensation above market replacement
  30. Non-recurring expenses
  31. Personal expenses run through practice
  32. Depreciation and amortization
  33. Interest expense

    34. The Earnout Reality

    Most deals include earnouts or rollover equity:

  34. 20-40% of value may be contingent
  35. Rollover equity typically 20-30%
  36. Second bite often more valuable than first

    37. The Process Timeline


    Phase 1: Preparation (6-12 months)

  37. Assemble advisory team (investment banker, attorney, accountant)
  38. Prepare marketing materials (CIM)
  39. Identify and address weaknesses
  40. Begin management presentations

    41. Phase 2: Marketing (2-4 months)

  41. Confidential outreach to potential buyers
  42. Management presentations
  43. Site visits
  44. Initial indications of interest (IOIs)

    45. Phase 3: Due Diligence (2-3 months)

  45. Extensive document requests
  46. Financial and operational deep-dive
  47. Legal review
  48. Quality of earnings analysis

    49. Phase 4: Closing (1-2 months)

  49. Final negotiations
  50. Legal documentation
  51. Employment agreements
  52. Integration planning

    53. Life After the Deal


    What Changes

  53. Governance and decision-making
  54. Reporting requirements
  55. Growth expectations
  56. Potential for add-on acquisitions

    57. What Shouldn't Change

  57. Patient care quality
  58. Clinical autonomy (negotiate this carefully)
  59. Staff treatment
  60. Community relationships

    61. Physician Retention

    Most deals include:

  61. Employment agreements (3-5 years typical)
  62. Non-compete provisions
  63. Performance expectations
  64. Continued clinical practice requirements

    65. Key Questions to Ask PE Firms


  65. What's your investment thesis for our specialty?
  66. What happened to the last platform you sold?
  67. How do you approach physician governance?
  68. What's your typical hold period?
  69. Can we speak to physicians from other portfolio companies?

    70. Red Flags to Watch


  70. Pressure to close quickly
  71. Vague answers about physician autonomy
  72. No references from physician partners
  73. Unrealistic growth projections
  74. Unclear plans for clinical leadership

    75. Considering PE or just want to understand your practice's value? We help physicians navigate the entire M&A process, from preparation through closing.


    private equityM&Apractice valuationmergers and acquisitionsexit strategy

    About the author

    Peter Kemp

    Managing Partner

    Peter Kemp is a healthcare operations executive with more than 15 years of leadership experience spanning physician practice management, private-equity–backed startups, and multispecialty clinical organizations.

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