Overview
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 specialties such as Plastic Surgery Practices to help grow in existing and new markets as well as provide support from a physician practice management perspective.
While healthcare private equity has been indirectly involved with plastic surgery since entering the dermatology space in 2011 and the subsequent consolidation that has occurred since, the space is witnessing an impressive, rapid, and growing surge of direct interest in recent years. 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 10 active, PE-backed plastic surgery platforms in the market. Despite this rapid and accelerating increase in consolidation, the plastic surgery market remains highly fragmented with a majority of physicians remaining independent as of 2023.
This dynamic serves as a strong indicator of continued, widespread consolidation in the years ahead. The level of market fragmentation, realizable economies of scale, growing demand alongside an increasingly difficult recruitment environment, and a breadth of ancillary revenue opportunities are attractive characteristics shared with other verticals experiencing consolidation, but these are supplemented by a lack of reliance on referral relationships, minimal health system interaction and competition, and a reimbursement environment not reliant on insurance payors, among others, that are specifically applicable to plastic surgery. Given these favorable traits, continued acceleration of private equity investment in the space can be expected.
The most active consolidator within plastic surgery private equity over the last 24 months has been Advanced MedAesthetic Partners (backed by Leon Capital Group), followed by Prime Plastic Surgery & Med Spa (backed by Western Metal) and Alpha Aesthetics Partners (backed by Thurston Group). The same 24-month period has also seen the establishment of 6 new platforms, resulting in over twice as many groups actively looking to consolidate the market compared to years prior. Our healthcare investment banking team at PGP anticipates continued sponsor-backed capital to fuel new platforms and bolt-on investments over the next 12-24 months.
Notable other platforms include Advanced Reconstructive Surgery Alliance (Webster Equity Partners), Pryor Health (Enhanced Healthcare Partners), Athenix (Latticework Capital Management), Inspire Aesthetics (Hidden Harbor Capital Partners), Olympus Cosmetic Group (VSS), Ascend Plastic Surgery Partners (Sheridan Capital Partners), and Cosmetic Physician Partners (a physician owned management services organization (MSO) with no traditional healthcare private equity sponsor).
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
