Selling a physician practice: Maximising value before going to market

by Josh Paul

For many physicians, their practice represents decades of hard work, established patient relationships, and personal sacrifice. When the time comes to consider a transaction, which is likely to be the only one a physician partakes in during their career, it is vital to be prepared.

Buyers, whether private equity-backed physician groups or regional health systems, evaluate practices the same way any sophisticated acquirer evaluates a business: through the lens of financial performance, operational efficiency, and growth potential. Understanding what drives value – and addressing weaknesses before going to market – can meaningfully improve both price and deal terms.

Clean financials ensure optimal valuation

The most common deal killer in physician practice transactions is disorganised or unclear financials. A buyer will conduct a detailed quality-of-earnings analysis, so it is worth engaging a healthcare-focused accountant to normalise financials at least 12 to 24 months prior to a process. Personal expenses run through the business, inconsistent coding practices, and undocumented add-backs all raise red flags.

Engaging an investment banker early can help with creating a sophisticated forecast which most buyers will be looking for. Having a projection model that is data driven aligns with best practices.

Operational independence from senior physicians is a significant value driver

Practices where the selling physicians are the sole revenue generators present transition risk for an acquirer. Buyers pay premium prices for practices with strong clinical staff, documented protocols, and a patient base that is tied to the practice rather than tenured physicians.

Having young practitioners who show strong growth in their practices over multiple years drive value for partner physicians. Buyers view this as a safety net if there are near-retirement physicians during a transaction. To get the most value, a transaction should be a retirement plan for physicians, not their retirement – meaning there should be a multi-year commitment post-transaction.

Timing the market is as important as timing the exit

Healthcare mergers and acquisitions (M&A) activity in the physician practice space remains active, with continued consolidation across a variety of specialties. Engaging an experienced M&A advisor 12 to 18 months before a desired close allows adequate time for preparation, a competitive process, and proper negotiation of post-closing employment terms which are often as important to physician sellers as the purchase price itself.

A well-prepared practice, brought to market at the right time with the right advisor, consistently commands higher multiples and better deal structures. The investment in preparation almost always pays for itself many times over.

Josh Paul is a director at Hyde Park Capital with extensive healthcare services M&A experience, including physician practice management (PPM). He holds the Series 79 securities license and advises physician practice owners on transaction execution, negotiation, and positioning.

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