The healthcare industry broke private equity activity records in 2017. Becker’s Hospital Review reports six big deals that were announced just this month. They include everything from a physical therapy practice management company to a healthcare software company.
Becker’s notes these deals will likely continue to grow through 2018.
What is the draw? There are generally two types of clients: those who are struggling and could use the capital to get back on their feet or those who are already successful but looking to grow. Private practices, software companies or others in the healthcare industry that find themselves in one of these situations may look a number of places for capital to move forward.
Private equity is one option.
What are the benefits and risks of using a private equity firm? There are both pros and cons to going with a private equity firm. Some practices may benefit from the capital to help build their footprint in an area, perhaps using it to springboard deals bringing in other practices in the area. The funds could also be used to help purchase ancillary services like imaging centers or real estate.
What happens during these deals? If a practice or other healthcare business chooses to go with a private equity deal, it generally involves the private equity firm providing a multiple of earnings based on an equation that takes various factors into consideration. In exchange, the private equity firm receives a majority or minority share in the practice.
The practice will need to carefully consider the proposal to ensure it meets their goals.
Are there other options? A private equity deal is just one way to get capital to move your practice forward. Other options are available. An attorney experienced in the healthcare market can help with the process, including gaining funds, completing due diligence and drafting any needed documents.