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  • Writer's pictureDavid Day

Should You Sell Your Practice to a Private Equity Firm?

As a medical professional (ophthalmologists, optometrists, orthodontists, and others) in a private practice, which of the following sounds more appealing at this point in your career: (1) continuing to build and manage your practice, keeping all of the profits it generates now and into the future for yourself, or (2) receiving the financial value of your practice today in exchange for future profits, handing the business aspects over to someone else and earning a salary as long as you continue to work? If option two sounds enticing and you own or co-own an ophthalmology, optometry, dentistry, orthodontia, or a medical specialty (such as orthopedics, dermatology, radiology, and gastroenterology), you may be interested in a recent trend among medical practitioners; selling to a private equity (PE) firm.

Many medical professionals enjoy the flexibility, control and financial lifestyle that comes with owning a business, but find the corporate aspects of running a practice to be a grind. Furthermore, the uncertainty surrounding medical reimbursements is often a growing source of stress. Naturally, many practitioners are interested in selling their practice because they are simply preparing for retirement and moving on to another phase of life. Whatever the reason, selling your practice to a PE firm is a fantastic option to consider, once you fully understand the main pros and cons.

Advantages of PE Firm Buyouts

Traditionally, a medical specialist seeking to sell his or her practice would focus on other, typically younger, doctors in the same specialty as potential buyers. Today, those more junior docs often still owe hefty amounts on their student loans so taking on substantial additional debt to buy a practice may not be feasible or palatable. In that situation, as the owner of the practice, you may need to consider financing the sale yourself. In that case, you would receive payments for the buyout over time, instead of a lump sum upfront. This approach involves accepting additional risk since there is no guarantee that the new owner(s) will be able to maintain a profitable practice. Those concerns are effectively eliminated with a PE buyout. Even if you truly want to sell to partners or junior people, incredibly strong PE offers can simply be too good to pass up.

Selling to a PE firm is an increasingly popular exit strategy for practices of any size. It eliminates concerns about how the buyout will be financed, which may be particularly important if you are getting ready to retire. Simply put, selling to a PE firm gets you out of the business of running a business, so that you can focus exclusively on working with patients. Depending on the buyer, you may be able to customize how much or how little you work after the sale. Often, the PE firm will stipulate that the owner stays on for some period of time and the practice owner is almost always incentivized to do so.

Why are PE firms interested in buying medical practices? There are a number of reasons, including the regular and reliable cash flows a medical practice generates. PE firms merge numerous small practices into one large practice so they can expand the range of patient services offered, obtain greater negotiating power in equipment purchases, and spread the cost of IT upgrades and other expenses over a larger revenue base.

Trade-offs to Consider

Of course, after a buyout, the PE firm is now entitled to the profits from the practice. If you continue to work (and most do, for 3-5 years), it will be on a salaried basis. While that may take some mental and emotional adjustment, keep in mind the headaches associated with managing the practice are no longer yours. Note that after some period, often 5-7 years, PE firms typically expect to exit their investments so they can harvest a profit and return the loaned capital with appreciation to their investors. It should be widely understood that there is a high probability the practice would be sold to another firm in the future.

With an increasing number of PE firms buying ophthalmology and other vision care practices, medical specialties and orthodontia/dental practices, many markets are seeing competition among PE firms for buyouts; that’s obviously good for the seller and may lead to more flexible working terms and/or a higher sale price through negotiations. In talking with a PE firm, be sure to discuss whether or not they will be responsible for all of the following – you will have to continue to manage any of these tasks if it’s not explicitly stated that they will take them on:

  • Financial management

  • Marketing (including website management, social media, etc.)

  • Billing and claims processing services

  • Human resources (benefits, retirement savings plan, etc.)

  • Accounting and payroll

  • Credentialing (for managed care organizations)

Planning for Charitable Giving

Selling your practice can be a tremendous, once-in-a-lifetime opportunity to optimize your financial capacity for charitable giving. If that is one of your goals, the key is planning for it well in advance of completing the sale. When you sell your practice, you may be able to capture significant tax advantages by gifting part of the proceeds to a Donor Advised Fund (DAF) that you can use to contribute to causes you support over time. This depends on the way your practice is structured and whether the operating agreement allows a non-MD/non-OD to own shares. If not, taxable securities can be gifted in place of the shares you would have donated. Gifts to a DAF should be done before you sign a letter of intent with a buyer, and must be done before the sale contracts are signed. This strategy can accomplish many years or even a lifetime’s worth of charitable giving all at once, in a tax year where the deduction will have the most value to you. Even if you are just starting to think about selling your practice, Gold Medal Waters can help you to maximize the financial impact and tax benefits of your giving.

A Seller’s Checklist

We have created a checklist of important financial and personal considerations for doctors in all specialties who are thinking about selling their practice to a PE firm. This checklist can be an invaluable resource before you have even an initial conversation with potential buyers, covering topics ranging from getting your financial statements in order to evaluate how the buyout would affect your quality of life. Click here to access and download the checklist – which we urge you to review with your financial advisor.


Whether selling your practice to a PE firm is the right move for you, now or in the future, depends on your specific needs, desires, preferences, and circumstances. In addition to the items on the checklist provided above, it’s important to consider personal financial planning issues, such as: paying for college education and/or weddings, funding your desired retirement lifestyle, paying down debt and reducing the stress that goes along with it. A Gold Medal Waters advisor can guide you in thinking through all that is involved in making this decision. Reach out to us today to get started.


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