Selling Your Optometric Practice to Private Equity
Process of Selling to Private Equity
Assess the current state of the practice and define the objectives for the sale. Engage experts who specialize in optometry sales to private equity.
Obtain an accurate fair market valuation of your optometry practice. Implement improvements to make practice more attractive to private equity firms.
Private Equity Firms
Identify potential private equity firms to approach. Be prepared to sign a confidentiality agreement. Interested firms will conduct a thorough exam of your practice.
Review offers from private equity firms and negotiate terms with the help of an expert. Once agreed upon, basic terms outlined in a letter of intent are signed by both parties.
Closing the Deal
Documents are signed and the deal is officially closed. There may be a transition period to fulfill any remaining obligations such as consulting, non-compete, or ongoing role.
Understanding Private Equity
There are several misnomers about private equity. It is important to know what private equity really is before engaging in the sale of your practice. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of private companies. After several acquisitions, private equity will roll up these companies into a consolidated or bundled whole with the express intention of selling the combined venture for a substantial profit. It is this “flip” of the consolidated whole that will potentially yield a second opportunity for profit. However, for most optometrists who you work for two or three years after the initial sale could change.
Private equity is primarily interested in free cash flow and not nearly as much in the hard assets or inventory of the business. Additionally, private equity will generally require that an optometrist stays in their current capacity and at their current production level for 3 to 5 years after the sale.
In many private equity transactions, the purchase price will be a combination of cash at closing, plus some additional rollover equity in the private equity firm. As a result, there is always some risk in a private equity transaction and how much money you will ultimately realize when the equity firm sells, and your partnership units become cash. This is referred to as the second bite of the apple.
During the negotiations, most PE firms, if not all will have a “no-shop provision” as well as other contingencies in the letter of intent. Most all doctors thinking about selling to private equity should give serious consideration to having full representation in the transaction. Not only will a representative generally increase the purchase price but will be able to guide you on what terms and conditions can be negotiated and which ones cannot.
Benefits of Selling an Optometric Practice to Private Equity
- Eliminate the headaches of private practice ownership
- Private equity offers much higher optometry practice values.
- Focus on being an eye care professional and work-life balance.
Learn more about the benefits of selling a optometric practice to private equity to see if this is the right fit for you.
Why Representation During an Optometric Practice Transition Sale to Private Equity is Imporant
Terms and Conditions
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If you're thinking about selling your optometry practice to a private equity firm, but you still have questions, reach out to us today. We're happy to answer your questions and help you make an informed decision about your future.