Dermatology Market Update
Private Equity Investment in Dermatology Practices
Overview:
Driven by regulatory efforts, market forces, and major structural changes, growth and consolidation have dominated U.S. healthcare for more than a decade. From hospital systems and insurance providers to physician practices, including dermatology and dentistry, all corners of the healthcare market are experiencing investment and buyouts, with larger super-regional and national platforms being established. Dermatology has been at the forefront of this trend.
Market Trends:
Private equity investment in the dermatology sector began in 2011 and has gained significant traction. By 2022, there were thirty active PE-backed dermatology platforms in the U.S. Dermatology practices share many characteristics with other physician specialties that have experienced successful consolidation waves, including significant fragmentation (though that is starting to shift) and notable imbalances between provider supply and patient demand.
Investment Drivers:
The dermatology market presents attractive investment prospects due to its fragmentation, potential for economies of scale, and ancillary revenue opportunities. These practices offer consistent cash flow and growth potential, making them particularly appealing to private equity investors. As a result, private equity buyers are eager to capitalize on these opportunities, especially during times of uncertain investment returns.
Market Activity:
In the second half of 2021, private equity groups made more than fifteen investments in various dermatology and aesthetic practices across the U.S. Notable consolidators in the dermatology private equity space include Dermatology Associates, Advanced Dermatology Cosmetic Surgery, and Epiphany Dermatology. The continued sponsor-backed capital is expected to fuelthe establishment of new platforms and bolt-on investments in the coming years.
Olympic M&A Approach:
At Olympic M&A, we specialize in guiding dermatology practices through the private equity process, ensuring successful outcomes for our clients. Our comprehensive approach includes:
1. Financial Modeling: Let us start by understanding where your practice stands. We will sit down with you to analyze your financials and develop tailored models. These models will paint a clear picture of your cash flow and credit potential, highlighting areas for growth. Whether you are gearing up for a sale or planning for the future, our financial insights will
guide your next steps. And remember, we only get paid when you do, ensuring our interests are fully aligned with yours.
2. Buyer Mix Strategy: Finding the right match for your practice is more than just a transaction—it is about finding the perfect fit. We identify and engage with a diverse mix of potential buyers, including strategic acquirers and private equity groups, tailoring our strategies to reach them effectively. With us, you will have a lineup of interested parties vying for your practice, driving competition, and maximizing value.
3. Buyer Marketing and Negotiation: Selling your practice is more than just putting it on the market—it is about presenting it in the best light possible. Our team handles every aspect of buyer engagement, from crafting compelling marketing materials to skillful negotiation, ensuring you secure favorable terms and the best possible outcome.
4. Client Positioning: Your practice is unique, and we will make sure it stands out from the crowd. We position your practice to attract the right buyers, emphasizing its strengths, cultural fit, and strategic alignment. With us by your side, you will have the attention of top-tier acquirers, ensuring your practice gets the recognition it deserves.
5. Transaction Management: Selling your practice can be complex, but we are here to simplify the process for you. We oversee every aspect of the transaction, maximizing leverage with potential buyers and ensuring a smooth and efficient process from start to finish. With us, you can focus on running your practice while we manage the rest.
6. Deal Negotiation: When it comes to negotiating the deal, experience matters. Leveraging our expertise in dermatology specialty, we negotiate key economic and structural terms to ensure a favorable outcome for you. With us, you will have a skilled negotiator in your corner, advocating for your best interests every step of the way.
7. Due Diligence Facilitation: Due diligence can be daunting, but we are here to guide you through it seamlessly. We facilitate the due diligence process, ensuring all the necessary steps are completed efficiently and without disruption to your day-to-day operations. With us, you can rest assured that everything is taken care of, allowing you to focus on
what you do best running your practice.
8. Maximizing Financial Results: At Olympic M&A, our success is tied to yours. We only get paid when you do, meaning our interests are fully aligned with yours. Our ultimate goal is to maximize your financial results while preserving your clinical autonomy, ensuring a successful and mutually beneficial transaction.
By leveraging our expertise and industry insights, we empower dermatology practices to navigate the complexities of private equity investment successfully.
Explore how these trends can impact your practice and what steps you can take to maximize value and strategic alignment.