Private equity interest in the plastic surgery space is witnessing an impressive, rapid, and growing surge of interest. Beginning with Prime Plastic Surgery in December of 2020, and most recently with Sheridan Capital’s formation of Ascend Plastic Surgery Partners in October of 2023, there are now over ten active, private equity backed plastic surgery platforms in the market. While interest and activity are widespread as of late, it is also relatively new compared to other specialties across the healthcare services landscape. Historically, private equity firms in the healthcare industry have been more inclined to invest in verticals providing services more medically necessary in nature where there is a level of insulation from broader swings in the macroeconomy. In the past, healthcare private equity and plastic surgery have only been mentioned in the same sentence when a dermatology consolidator acquired a group with a plastic surgery offering, but the current dynamic has shifted, and pure play plastic surgery groups are now top of mind for many healthcare private equity firms.
Many of the characteristics seen in other verticals are just as applicable in plastic surgery – a highly fragmented market, realizable economies of scale, growing demand alongside an increasingly difficult recruitment environment, and a breadth of ancillary revenue opportunities. This realization has led to experienced healthcare investors looking to replicate what they have done in other specialties while accounting for and taking advantage of the nuances inherent within the plastic surgery space.
Unlike other physician specialties where coming together has made sense, plastic surgeons have not had much of an impetus or appetite to do so. The referral dynamics, lack of health system interaction and competition, and reimbursement environment not reliant on insurance payors, among others, has not necessitated it. More healthcare private equity investors, and now in turn physicians, are realizing consolidation in the space provides significant upside. Increased buying power, centralized marketing capabilities and brand development, ancillary revenue streams not reliant on the provider themselves (med spas, for example), and the ability to offer much more attractive packages to new recruits, just to name a few, present huge upside to surgeons across the country.
The continued, growing interest from the private equity community alongside increasing reciprocal interest from physicians has the plastic surgery space primed for ongoing, and even accelerated consolidation activity. The ten active platforms in the space will continue to aggressively pursue add-on acquisition opportunities, while additional private equity firms look to find a platform they can build their investment thesis around.
Expansive demand for high-quality assets is enabling forward-thinking, initiative-taking groups the opportunity to bring in a capital and operational partner to lead a change in trajectory of the plastic surgery space. We expect 2024 to be a record setting year for plastic surgery consolidation, a trend that will continue for some time to come. With private equity’s entrance in plastic surgery being so new, it is imperative for groups to consider cultural fit, as well as value, as strategy differs highly from platform to platform. Key aspects such as clinical autonomy, integration, management fees, and establishing a local governance structure must be considered to ensure a strong go-forward partnership.
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