Following a wave of consolidation across various provider-led healthcare specialties, private equity investors have now targeted the historically overshadowed Medical Aesthetics industry, which includes Medical Spas (“MedSpas”), Cosmetic Dermatology, and Plastic Surgery practices.
The Medical Dermatology segment has seen heavy consolidation in the last decade, with more than 20 platforms now active across the country. Their focus has been on services that are reimbursed by government or commercial carriers. Historically, there has been hesitation by sponsors to invest in aesthetically focused groups (i.e., the Medical Aesthetics industry) given perceived cyclicality and the risk associated with customers bearing 100% of the service costs.
However, we have seen that tide begin to turn in earnest as sponsors are recognizing the significant market fragmentation and attractive macro/micro dynamics existing in the Medical Aesthetics space. The industry boasts a market size of $17.5 billion with a 5-year CAGR of ~10%. Additionally, Medical Aesthetics practices have proven to be resilient and have continued to see strong growth throughout recessionary periods in which other general discretionary spending has declined.
As private equity investors and existing strategic consolidators begin to recognize the growth potential within the Medical Aesthetics space, we anticipate continued sponsor-backed capital will fuel new platforms and bolt-on investments to the 15+ existing Medical Aesthetic platforms.
Over the last 12-18 months, PGP has seen a surge of new private equity platform investments established, including Advanced Medaesthetic Partners(Leon Capital Group), Alpha Aesthetics Partners (Thurston Group), Princeton Medspa Partners (Princeton Equity Group), Athenix (Latticework Capital), and Inspire Aesthetics (Hidden Harbor Capital Partners), further illustrating interest in Medical Aesthetic groups and the expanding market for acquisitions.
PGP expects the attractive investment dynamics and tailwinds associated with the Medical Aesthetics space to continue for the foreseeable future, creating a significant opportunity for independent owners and operators to capitalize on and utilize investor expertise to scale and grow their practices in this rapidly expanding segment.
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