M&A of Physician Practices and Medical Groups
Tune into Bloomberg or leaf through an M&A Industry report and you're bombarded with transactions involving pharmaceutical companies, medical device makers, and large health systems. While these industries represent significant segments of healthcare merger and acquisition activity, they often overshadow a major component of the market: Small to mid-sized health service businesses and medical professional practices.
What does this market segment consist of?
Health service businesses can include hospitals, medical practices, and various care facilities. Naturally, the bigger hospital-driven deals garner more attention as the stakes are high and billion dollar deals make for eye-catching headlines. However, the fundamental delivery of healthcare in the United States is underpinned by smaller and mid-sized medical groups and facilities which don't often come into focus. Deals in this market segment are occurring at a very rapid pace. These deals are not covered in as much depth nor are sufficiently understood by the business transaction community.
Who represents medical practice owners?
As far as transaction advisory in this area, we feel there is a massive void. At the top end there are large investment banks and M&A firms who have wide knowledge and expertise but lack the desire to take-on "lower middle market" or "small business" transactions. At the bottom end there are business brokers and financial advisors who transact general businesses but have little or no expertise to deal with the complexities of healthcare deals. In general I am speaking about deals involving health service businesses and professional practices with revenues between $500,000 and $10,000,000.
The factors driving deal activity in healthcare
Integrations, acquisitions, consolidations, and sale of medical practices have historically occurred in waves. The latest wave has been driven by Accountable Care Organization formation and regulatory pressures. This has caused some medical practices and groups to align themselves with hospitals and health systems. These deals often do not work to the physician's favor financially, as well as from a post-integration operational standpoint. Another common trend (which appears to be more sustainable) is a wave of independent medical groups who are purchasing smaller medical practices. The growth of large medical groups by acquisition will be an important factor, as these groups seek every method by which to remain autonomous and maintain a strong market presence. We believe that few advisory firms are in a position to facilitate these types of deals.
What does Transition Consultants offer?
Most solo to small group medical practices are closely-held businesses owned by physicians. We believe that many advisory firms do not understand the mindset of clinicians, how to best serve their needs, and how to leverage the appropriate mix of financial know-how and savvy to appropriately consummate these deals. We are able to bridge the gap between small physician-run group dynamics and the financial expanse of mega-groups and private equity. In the short-to-mid-term horizon we predict a steady flow of large dollar deals in small healthcare practice transactions.
Serving doctors in private practice
Practice owners may have little knowledge of where to turn for guidance in an ever-changing market. The key is to find an advisory firm who knows how to manage the intricacies of complex healthcare business transactions yet maintains an intimate understanding of the needs of healthcare providers. We believe we can fulfill this role.
Transition Consultants is a physician practice transaction, valuation, and financing group. We serve doctors in private practice and medical groups in merger, acquisition, roll-up, and private equity transactions nationwide. Call us today for a complimentary consultation: 800-416-2055.