“Monetizing” the Value of Your Ownership in Your Practice: Critical Consideration #1

Partnering with a private equity (PE) investor can help physicians monetize the value of their practice. Why treat your practice differently than other assets in your retirement portfolio?

A PE transaction will provide an up-front cash payment and/or rollover equity in the PE platform. Up-front cash, usually 70-80% of the “real value” of your practice, is calculated on a multiple of the practice’s free cash flow or earnings before interest, taxes, depreciation, and amortization (or “EBITDA”).  The remaining balance of purchase price (20%-30%) is usually paid in the form of rollover equity.

Rollover equity converts to additional cash payments upon a secondary sale to another investor down the road. Further, many PE transactions are structured so that if a physician retires, becomes disabled, or dies, his/her rollover equity is purchased at its then fair market value.

Event Date: Tuesday, April 14, 2020

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Category(s): Physician Groups / Providers

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