Driven by regulatory efforts, market forces, and major structural changes, growth and consolidation has dominated U.S. health care for more than a decade.
From hospital systems and insurance providers to physician practices ranging from dermatology to dentistry, all corners of the health care market are experiencing investment and buyouts, with more and more large superregional and national platforms being established. Dermatology was at the forefront of this trend.
Private equity investment in the dermatology sector began in 2011 and private equity’s focus on this specialty gained traction so that as of 2022 there are now 30 active PE-backed dermatology platforms in the U.S.
Dermatology practices share many characteristics with other physician specialties that have experienced successful consolidation waves. For example, there is significant fragmentation (although that is starting to shift), coupled with significant imbalances between provider supply and patient demand.
In the second hald of 2021 private equity groups made more than 15 investments in various dermatology and aesthetic practices around the U.S. Private equity buyers are eager to acquire the consistent cash flow and growth potential that specialty practices like dermatology can provide. During a time of uncertain investment returns, all of us at Physician Growth Partners expect this interest to only increase.
Our team has successfully guided several dermatology practices through the private equity process. There are several steps that we take to ensure successful outcomes for our clients, these include:
- Develop the appropriate financial modeling to position maximized cash flow and “credit” for ongoing initiatives that are driving growth
- Determine the right mix of potential buyers (including both strategic acquirers and private equity groups) and implement a strategy to reach them
- Managing buyer marketing, bid solicitation, and negotiation
- Position the client to meet relevant potential buyers with strong offers that address cultural fit, strategy, and alignment
- Manage the transaction process to maximize leverage with potential buyers
- Negotiate key economic and structural deal terms, leveraging PGP experience within the dermatology specialty
- Facilitate all due-diligence pre-closing to ensure a seamless process that does not take away from the day-to-day business while ensuring the highest probability for a successful close
- Maximize financial results for shareholders while maintaining clinical autonomy