A unique medical practice seeks a strategy to provide liquidity for the owner while accelerating practice growth and keeping the team intact and aligned for the future.
Situation
The practice provides a unique combination of medical and cosmetic gynecology services and other complementary services, such as hormone replacement therapy, medical aesthetic treatments, and weight loss. The founder and solo owner of the practice was interested in creating a plan to gradually transition into retirement over the next five to 10 years. Having outgrown its facilities, the practice was considering implementing a de novo growth strategy, which would require a large capital investment in new facilities and additional staff. The owner was interested in pursuing strategic partnerships that would provide a liquidity event and eliminate some of the investment risk associated with the de novo strategy.
Solution
VMG Health’s Sell-Side M&A Advisory team was retained to represent the practice to potential investors. The M&A team identified and showcased the most relevant business highlights to potential investors and created a forecast model of the practice, which included the de novo growth opportunities. VMG Health’s Financial Due Diligence team was also engaged to conduct a sell-side Quality of Earnings (QoE) analysis, which included adjustments to revenue and EBITDA for pro forma and one-time items.
Given the practice’s unique profile and to draw out a variety of strategic options for the owner, the M&A team approached a broad group of nearly 100 potential investors. VMG Health helped select six investor groups to meet with the practice leadership team. Each investment group presented different financial and strategic structures. The practice was highly attractive and competition among investors drove the valuation and deal terms to very attractive levels. VMG Health negotiated multiple offers, and the practice owner chose the option that most closely aligned with their strategic goals.
Success
With VMG Health’s support, the practice struck a deal with a private equity–backed management services organization (MSO). The final valuation was 35% higher than the client had anticipated prior to hiring VMG Health. The client was also able to take out much more liquidity than they originally expected. The investor committed capital to the de novo growth strategy. Key employees were granted equity in the MSO platform entity, which aligned all parties for the practice’s future success. VMG Health was instrumental in evaluating and marketing the practice, conducting a thorough deal process, and navigating a successful close.
