The Challenge of Unsolicited Offers in Private Equity
Unsolicited offers are common in private equity-backed markets. Private equity buys a platform or a group of practices with the goal of growing them. They do this to increase profits and sell the platform after about five years. Growth strategies can vary. However, the easiest way is often to buy profitable practices and add them to the larger business. Yet, finding these businesses can be tough, especially in a less mature market without a strong business development team.
The Role of Unsolicited Offers
In these cases, new groups often depend on “unsolicited offers.” These offers come in many forms, such as mail, phone calls, emails, or referrals. Most are based on limited data, like a profit and loss statement (P&L) for the past 12 months. The goal is to present an offer to buy or partner with your medical aesthetics practice without you seeking them out.
Understanding the Risks
To see the risks of unsolicited offers, you need to know how private equity works. Their main goal is to buy practices at the lowest price. Then, they combine them with others and sell the whole package at the highest price. This price gap, called “arbitrage,” is how they make money and get funds for future deals.
However, many parts of the deal can lower the value of your practice. This reduces how much private equity groups have to pay upfront. It’s not about bad intentions; it’s just how the business works. They look for deals where they can control the data, people, and story. If you’re negotiating with a private equity-backed MSO, remember they exist to make money for their investors. While this can benefit you in the long run, it might reduce your practice’s value in the short term.
The Solution: Proper Representation
The fix is simple: get proper representation at the negotiation table. Just as you wouldn’t go to court without a lawyer, you shouldn’t sell your life’s work without an advocate. From the start to the end of the sales process, you need someone who knows your business’s financials. This person can argue what drives profitability and explain the long-term value of your practice.
A good advocate ensures a thorough and competitive process. This lets you see the full value of your business and negotiate with several buyers. It’s the best way to get the full value of your practice. What’s the downside? There isn’t one. Research shows that transactions with a seller advocate (broker) usually get 20-40% higher value, even after fees. It’s a win/win for every practice owner.
Next Steps
If you want to understand the true value of your practice and explore your options for selling, reach out to Tusk Practice Sales for a free market analysis. We’ll discuss the opportunities within your business and how to maximize its value in the sales process.
About the Author
Josh Swearingen, Director at TUSK Practice Sales, has over 15 years of leadership experience in the healthcare industry. He most recently served as the CEO of Vesper Alliance, an MSO in Cincinnati and Columbus, OH. Josh is also the Co-Founder of Reverse Aesthetics, a medical spa and anti-aging practice in Columbus, Ohio. He earned his B.S. from THE Ohio State University.
