PF Insights

Our position on the front lines of private equity's interest in specialty practices and surgery centers gives us a unique perspective. We can clearly see signs of private equity acquisition interest beginning to spread to other medical specialties. In this episode we identify the key reasons for the interest in new specialties and provide some directional thinking on what specialties look attractive and when acquisition momentum could begin to take hold.

We take the mystery out of private equity recapitalization and help physicians understand what that means for them as an employee and shareholder of the new practice management company. This recapitalization cycle is an important part of the private equity ecosystem and physicians are wise to understand how it may affect their future. Because of the structure of private equity investments, it’s not uncommon for physicians to outlast the private equity firm that acquired their practice ... hence the concern surrounding potential new employers in the future.

As the title suggests, we'll spend this episode talking about who should and who should not sell their private practices to private equity investors, as well as the reasoning behind these distinctions. We'll discuss factors that make physicians and practices both desirable and undesirable to investors, as well as why not all Physicians that should consider selling to Private Equity.

One question that physician owners often have is how private equity investors will further optimize the practices that they have spent years building. In episode 18.11, we reference our advisory resources article titled, “Ophthalmology From Private Equity’s Perspective, Rationale, Risk And Reward” to look at this question from PE’s perspective and explain how private equity makes money off of their investments.

One question that physician owners often have is how private equity investors will further optimize the practices that they have spent years building. In episode 18.11, we reference our advisory resources article titled, “Ophthalmology From Private Equity’s Perspective, Rationale, Risk And Reward” to look at this question from PE’s perspective and explain how private equity makes money off of their investments.

In this episode of PF Insights, we discuss the key differences in consolidation and acquisition of health care practices in the 1990s compared to the current state of PE backed consolidations and acquisitions. We look at key similarities and differences of the acquisition time periods and focus on the fundamental change that has made acquisition models more successful for both physicians and buyers.

The bottom line on this one is, you get more value from an investment banker than the amount of money you pay in fees. That's been our experience and it has been confirmed in independent studies on the issue.

We've lived this many times but this is new territory for our clients. Of course they should ask this core question before they move forward. In this podcast we do our best to communicate the real issues you will be facing and how an investment banker will be an important and trusted guide to help you reach your goals

I could do this myself ... what benefits make an investment bank worth the cost? 0:00 - 10:40
The best have been shown to deliver higher offers that more than pay for their fees
They invest extensive amounts of time to secure a successful transaction
They handle unforeseen obstacles that will occur in due diligence with experience and professionalism
They help facilitate disagreements between partners that often occur during the process
How long does the transaction process take and what are the key steps? 10:41 - 18:00
Conservative a year .. can be 6 - 12 months depending on physician engagement
From start to finish ... an overview of our systematic process

Practice continuity is extremely important to the success of the new post-transaction entity. Physician-owners want to keep their patients and employees happy. They want to maintain and fulfill their business relationships with associate physicians. Potential buyers want that as well. They want the operation to continue uninterrupted and successful.

The bottom line is, there is a lot of alignment in this area but it is important to understand the new means by which these goals are accomplished.

How will a transaction with private equity affect my associate physicians working toward partnership? 0:55 - 9:21
The single biggest issue for the investor is practice continuity. We discuss three attractive associate physician buy-in options and post-transaction partnership opportunities
Won't a private equity acquisition reduce opportunities for my associate physicians? 9:22 - 11:22
Private equity partnership opportunities can be more attractive to young physicians
Can private equity help me with the important but difficult task of recruiting quality new physicians? 11:23 - 14:20

This is an area of major interest because it is totally new territory for our clients and it can be both overwhelming and intimidating. New terminology, a multitude of cash and equity structures, private equity companies and global ophthalmology platform operating companies.

We bring experience and understanding to this complex issue so our clients can evaluate their options and find the best solution for their situation and goals.

What are the typical cash/equity structures in a private equity transaction? 0:50 - 9:20
A review of: 1) 100% cash purchase, 2) Cash plus minority retained equity in the practice, 3) Cash plus global platform operating company equity.
What is the difference between the private equity company and the global ophthalmology platform operating company? I get confused by multiple names. 9:21 - 11:44
Should I seek more cash or more equity in the deal structure? 11:45 - 15:47
Understanding global ophthalmology platform company recapitalization risk and reward
What other types of investors may be interested in investing in my practice? 15:48 - 18:53

After years of running their own practice, building a solid team, investing in new technology and growing their practice, physicians are faced with a new reality. The transition from physician-owner to a physician partner is a major area of concern to our clients ... and it should be. Hence the question, "How does life change for physician partners after a transaction?"

Existing physicians are considered one of the most important assets in the transaction and their continued dedication and support is critical to future success and an enjoyable future.

Can I continue to work for the practice after it’s acquired? 0:44 - 2:56
How does my post-sale physician compensation impact the transaction valuation? 2:57 - 9:46
Is it smart to lower my compensation going forward to drive a higher sale price? 9:47-14:21
Will a sale change my practice into something I don't like? A new name, new culture, new staff, new operations, etc? 14:25 - 17:20