Driven by market inefficiency, ancillary opportunity, and broader economic headwinds, healthcare private equity consolidation has been a leading force of change within healthcare for over a century. Starting in the late 1990’s, the primary entity behind this consolidation has been outside investors specifically, healthcare Private Equity investors, looking to partner with clinically strong providers and create regional and national platforms. Leveraging size and scale, these healthcare private equity funds invest alongside providers in medical and medical adjacent specialties such as Medical Aesthetic providers and Med Spas to help grow in existing and new markets as well as provide support from an operational and administrative perspective.
Healthcare private equity really kicked off in the Medical Aesthetics (i.e., Medspa, Beauty Care, Cosmetics / Aesthetics) space back in 2018 and has only recently accelerated over the last couple of years as investors began taking notice of the industry secular trends. With less than 20 active consolidators to date, the sector remains heavily independent of private equity (+90% unassociated with PE and +80% are single unit operators), suggesting a ton of white space consolidation to occur in the years ahead. As the Medical Aesthetic industry checks several investment thesis criteria (i.e., high fragmentation, few active consolidators, reimbursement dynamics (100% private pay), low discretionary spending risk, recurring revenue streams (both primary and ancillary service lines), model replicability / expansionary opportunity)), we expect investment acceleration to continue as well as the establishment of new strategic platforms.
At this time, the most active consolidators within Medical Aesthetics private equity over the last 24 months has been Advanced Medaesthetic Partners (backed by Leon Capital Group) and Medspa Partners (backed by Persistence Capital Partners). More interestingly, four new platforms have been established in 2023 alone including Princeton Medspa Partners (backed by Princeton Equity Group), Alpha Aesthetics Center (backed by Thurston Group), Empower Aesthetics (backed by Shore Capital Partners), and The Skin Center (backed by Bridgeway Management). Other notable platforms include Inspire Aesthetics, Ideal Image, OVME, LaserAway, OrangeTwist, and Laser MD.
Our healthcare investment banking team at PGP anticipates continued sponsor-backed capital to fuel the creation of new platforms and rapidly accelerate add-on investments in the Medical Aesthetics industry over the next 12-24 months.
The Physician Growth Partners healthcare investment banking team has successfully guided hundreds of independent healthcare providers through private equity processes, with a strong focus on helping our clients find a partner that will set the practice up for long-term success in their healthcare private equity journey.
Our team at Physician Growth Partners focuses on a number of key areas to ensure our clients are successful in the pursuit of a healthcare private equity partner:
- Develop the appropriate financial modeling to position maximized cash flow and future “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
- Assist client in running a full due-diligence process on buyers to ensure the best partner is selected
- Negotiate key economic and structural deal terms, leveraging PGP experience within the Provider-Led healthcare services space
- Facilitate all pre-closing due diligence 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