Private Equity vs. Independent Buyers: Who Pays More for Healthcare Practices?

DiligenceSure
Sat, 17 May 2025 11:25:26 +0000
Business

10 Min Read

Selling your healthcare practice isn’t just a transaction. It’s a turning point professionally, financially, and personally. If you’re reading this, chances are you’re thinking about selling or at least preparing to.

Your choice now can determine whether you walk away with your full financial reward or spend the next decade wondering what went wrong.

Two paths stand before you: selling to a Private Equity (PE) group or handing the reins to an Independent Buyer—usually a local physician, associate, or smaller group.

Private Equity vs. Independent Buyers—Which path leads to more money? More freedom? Less regret?

You may be surprised to learn that who you sell to may matter more than how much they’re offering.

Let’s break it down in this blog post.

The Stakes: Why This Choice Can Make or Break Your Retirement

If you’re nearing retirement or just ready to step back, here’s what you need to understand: you are holding a highly perishable asset.

Healthcare practices, especially primary care, dental, behavioral health, dermatology, ophthalmology, and other specialties, are being scooped up rapidly by private equity-backed platforms. The wave is real, but it won’t last forever.

Market saturation is growing. Some specialties are already consolidating at a pace where premium offers are dwindling. If a PE firm already controls your local area, your leverage goes out the window.

According to a report by the American Antitrust Institute, in 28% of metropolitan statistical areas (MSAs), a single PE firm has more than 30% market share by full-time-equivalent physicians. In 13% of MSAs, the single PE firm market share exceeds 50%. This level of consolidation can significantly impact competition and physician autonomy in those regions.

You may be thinking, “I’ll wait until I grow my revenue a bit more.” The truth is, valuation multiples can shrink faster than your revenue can grow. With regulatory changes, interest rate volatility, and labor costs on the rise, delaying this decision can cost you millions.

The Private Equity Pitch: Big Money, Bigger Trade-Offs

Let’s start with what made PE buyers the top choice in recent years.

What They Offer:

High valuations: PE buyers often offer 6x–12x EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), depending on your specialty and market.

Upfront cash: A portion, often 60–80%, is paid at closing.

Equity in the platform: You may be invited to “roll over” part of your proceeds into the larger organization, giving you a stake in its growth.

Operational support: PE firms typically bring in systems, staffing, and processes to streamline your practice and improve margins.

Here’s the fine print:

You’ll lose autonomy as clinical independence can quickly be replaced with quarterly performance metrics, cost controls, and centralized decision-making.

Earn-outs are not guaranteed. If your practice doesn’t meet revenue goals, you may not see the rest of your payout.

You’re not done yet. Many deals require you to stay on for 2–5 years. And no, this is not a quiet advisory role. You’ll still be seeing patients.

Research published in Health Affairs in 2024 revealed that PE acquisitions led to a 265% increase in physician turnover rates within three years post-acquisition, compared to non-PE-acquired practices. This significant rise underscores the potential instability introduced by PE ownership.

Dr. Lisa, a gastroenterologist in the Midwest, sold to PE for $7.4M but had to stay full-time for three years, meet aggressive KPIs, and eventually settled for a reduced earn-out because of COVID disruptions.

Would she do it again? “Probably yes, but differently,” she says. “I would’ve negotiated harder and brought in an advisor earlier.”

The Independent Buyer Play: Familiar Face, Smaller Check?

Independent buyers are usually physicians you know, or at least someone within your community.

What They Offer:

Continuity: They’re often committed to preserving your clinical approach, staff, and culture.

Fewer strings attached: Simpler deal terms, less bureaucracy, and sometimes a quicker close.

Personal connection: Many sellers appreciate handing their legacy to someone they trust.

The Trade-Offs?

Lower purchase prices: Expect 2x–4x EBITDA, depending on the buyer’s financial situation.

Limited financing: Independent buyers often rely on bank loans, SBA financing, or personal capital, which can delay or limit their offer.

High dependency risk: If the buyer is inexperienced or lacks management support, your practice may suffer during the transition.

Dr. Smith sold his family medicine clinic to a former associate for $1.9M. It was an amicable deal, and he walked away in six months. Had he explored PE options, he might have received closer to $4M. “I chose peace of mind over profit,” he says. “But I still wonder what I left on the table.”

Who Pays More? Private Equity vs. Independent Buyers

Let’s talk hard numbers.

Private Equity:

Typical range: 6x–12x EBITDA

Upfront: 60–80% cash

Deferred: Earn-outs + equity rollovers (20–40%)

Independent Buyers:

Typical range: 2x–4x EBITDA

Upfront: Often 100% in cash or bank-financed

Deferred: Rarely applicable

Here’s the catch: That extra money PE offers? It often comes with strings:

Earn-outs tied to revenue targets

Equity that may or may not pan out

Mandatory post-sale employment

Guess what? If your compliance isn’t pristine or your financials aren’t optimized, neither buyer will pay full price.

Control, Culture, and Chaos: What’s the Cost Beyond the Price Tag?

Money isn’t everything, especially in healthcare.

Private Equity may offer more cash, but often at the cost of clinical autonomy. Protocols change. Staff is consolidated. Your name on the door? Gone within a year.

On the flip side, an independent buyer may respect your culture and vision, but may lack the infrastructure to scale or even sustain what you’ve built.

Here’s what to consider:

Do you want to walk away clean or stay on and grow something bigger?

How important is your legacy, your staff, and your patient relationships?

Are you comfortable with someone else calling the shots?

Remember: The highest bidder isn’t always the best buyer.

The Compliance Trap: Why Neither Buyer Will Save You From a Bad Audit

This is where most doctors stumble badly.

Buyers don’t just look at your revenue. They scrutinize:

HIPAA compliance

Billing accuracy

Provider credentialing

Employment contracts

Referral patterns

Lease agreements

One small issue in any of these areas can kill your deal or drop your valuation by 30–50%.

Imagine spending 25 years building your practice, only to have the deal fall through because your front desk was using unsecured email for patient intake forms.

Don’t assume your buyer will “clean things up.” That’s your job—before due diligence begins.

Ask yourself: Can you hand over your compliance documents today and feel confident? If not, it’s time to act.

The Real Killer: Delaying the Decision

Let’s be blunt: Procrastination kills deals.

Doctors often delay for reasons like:

I want one more strong year of revenue.

I’m not emotionally ready.

I don’t know who to talk to.

Every year you wait:

Your patient base may shrink.

Key staff may leave.

Regulations may tighten.

PE activity may shift to other regions or specialties.

We’ve seen practices that were worth $5M in 2021 now struggling to fetch $3M in 2025.

You wouldn’t delay treating a patient, right? So why delay your exit plan while the financial clock is ticking?

Another Dealbreaker: Culture Clash After Closing

Beyond compliance and valuation lies a deal-killer few sellers see coming: cultural misalignment. This often rears its head after the ink dries. A physician who built a close-knit, patient-first environment may be shocked when new owners impose top-down productivity mandates or replace trusted staff with outsourced solutions.

PE firms, especially, operate with a financial playbook. If your values don’t align—if their vision is “scale and sell” while yours is “care and community”—conflict is inevitable.

Even independent buyers, despite their best intentions, can falter. A new owner may lack the leadership skills to command respect or the experience to manage day-to-day operations. The result? Staff turnover, patient attrition, and damage to your legacy.

You must vet not just their offer, but their operational philosophy. Ask potential buyers tough questions about patient care, staffing, scheduling, and transition plans. Get references. Demand clarity.

Once you sell, there’s no rewind button. And cultural mismatch isn’t something an attorney can fix post-sale. If you’re proud of what you built, protect it by ensuring your buyer will honor and not unravel your legacy.

How to Know Which Buyer Is Right for You?

Here’s how to get clarity—fast.

Step 1: Know What You Want

Ask yourself:

Do I want the highest payout or the cleanest exit?

Am I willing to stay involved post-sale?

How important is my clinical independence?

Step 2: Get a Professional Valuation

Don’t rely on guesswork or hearsay. A third-party valuation considers EBITDA, market trends, growth potential, and risks.

Step 3: Audit Your Practice for Risks

You must identify red flags before buyers do:

HR issues?

Coding inconsistencies?

Referral compliance?

IT security gaps?

Step 4: Explore Both Buyer Types

Engage with both PE firms and local buyers, but do it strategically. Also, never negotiate without proper representation.

The Real Deal Happens Before the Offer

Let’s step out of the spreadsheets for a moment. Put aside EBITDA. Forget valuations. Forget private equity, forget independent buyers.

Ask yourself something much harder:

When this is over, when the doors close behind you for the last time, what will you regret more?

Walking away with less money than you could have?

Or leaving behind something you didn’t protect well enough to last without you?

Here’s the truth: no broker, no banker, and no buyer will say to your face:

The defining moment of your practice’s sale isn’t the day you get the offer. It’s the quiet months before, when no one’s watching. When you either prepare like hell or just hope it all works out, and hope is not a strategy.

This isn’t Wall Street, this is your life’s work.

Your practice isn’t just a cash-flow asset—it’s the operating room where you saved lives, the exam room where you comforted families, the business where you gave people purpose and careers.

You’re not just selling a business, you’re selling proof of who you were—how you led, how you built, and how you finished.

Also, the market will judge you accordingly. Buyers don’t just see numbers. They see gaps, red flags, loose wires, and they see what you failed to do.

While they might smile in the meeting, they’re subtracting in silence. They’re thinking: “This owner wasn’t ready. Let’s discount accordingly.”

Think of it this way: Imagine two surgeons, both are retiring. One walks into the operating room on her final day with everything prepped, files in order, the next team trained, and every risk mitigated. She leaves with applause and peace.

The other?

She shows up with last-minute updates, messy records, and unanswered questions. She walks away in confusion, and everyone else pays for her lack of preparation.

Which one are you going to be, because you will be one of them.

Whether you’re selling in six months or six years, the quality of your exit is being written right now.

So don’t get trapped comparing buyers when your house isn’t even ready for sale.

Private equity may pay more, but only if your practice is pristine. Independent buyers may feel safer, but only if they see a roadmap, not a risk.

None of them, not one, will clean up your compliance issues, credentialing gaps, or staff misalignment for you.

That’s where DiligenceSure comes in.

DiligenceSure prepares your practice behind the scenes, exposing what’s broken, fixing what’s missing, and positioning you to command top dollar from any buyer.

Think of us as your final scalpel—cutting away risk, stitching up weak points, and leaving you with something clean, strong, and sellable.

You have one shot to exit with power, pride, and the payout you deserve. So while choosing between buyers, start by becoming the kind of seller both of them fight over.

When your practice is transparent, the offers won’t just come, they’ll compete.

Are you ready?

Or are you going to let everything you’ve built slip quietly out the back door?

Your legacy deserves better. So do you, let’s make sure of it.