Should I sell my physical therapy practice to private equity?
It depends on what you want after closing. Private equity can pay a strong multiple and give you a second payday through rollover equity, but you give up control, and part of your value depends on the platform's own future sale. Your three main paths are a private equity platform, a strategic acquirer, or your own team. The right one starts with your goals, not the acquirer's.
By Joseph Anzur, CFA, Managing Director, Mergers & Acquisitions. Updated .
What private equity offers, and what it costs you
Why owners say yes
- Cash at closing that takes risk off your personal balance sheet.
- Rollover equity: a stake in the larger platform that can pay again when the platform is sold.
- Billing, compliance, HR and payer contracting handled centrally.
- Capital to open or acquire more clinics than you could fund alone.
What owners give up
- Final say over staffing, operations and growth decisions.
- Certainty on part of the value: rollover equity and earnouts depend on future performance.
- Flexibility on your own time: most transactions require you to stay on for a period.
- Some of your culture, if you choose a partner who changes more than you expected.
Cash at close, rollover equity, earnouts and seller notes
The headline multiple is only part of the answer. Almost every private equity transaction combines four pieces, and the mix decides what the number is really worth to you.
- Cash at close. Paid when the transaction closes. The most certain part of the value.
- Rollover equity. Part of your value is reinvested as ownership in the acquiring platform. It can be worth more at the platform's next sale, or less if the platform underperforms.
- Earnout. Additional payments if the practice hits agreed targets after closing. Read the targets closely, because you will be measured against them while someone else runs the company.
- Seller note. Part of the price paid over time, like a loan you make to the acquirer.
In one recent MHA transaction, an eight-clinic practice with $1.5M of EBITDA traded at 7.0x to 8.0x, with the owners taking significant rollover equity. See the valuation multiples by practice size.
Private equity, a strategic acquirer, or your own team
| Path | Who it suits | What to weigh |
|---|---|---|
| Private equity platform | Owners who want liquidity now and a second payday later, and who are comfortable working inside a larger company for a few years. | Rollover equity risk, earnout targets, your role and length of service, how much the platform changes your clinics. |
| Strategic acquirer | Owners who want to join an established operator, often with more cash at close and a defined role. | Integration into their systems and brand, and how your staff and patients will experience the change. |
| Your own team | Owners who want to protect their legacy and culture by transitioning to senior clinicians over time. | Usually a lower price paid over a longer period, and it depends on your team's ability to finance it. |
The promise to be careful of
Paul Martin asked six of the most active acquirers in physical therapy the same question: what is the most common promise sellers hear that is unrealistic once the transaction closes? All six gave the same answer: that nothing will change. Something always changes. The question is whether your partner is honest with you about what changes, and why, before you sign. Read Paul's article.
Questions PT business owners ask
What is rollover equity when selling a PT practice?
Rollover equity is the part of your value you reinvest as ownership in the acquiring platform instead of taking as cash. It can pay again when the platform is sold, and it can also lose value if the platform underperforms.
Will I have to keep working after selling to private equity?
Usually for a while, but the length and shape of your role is negotiable, and you have more say over it than most owners assume. It is a term you negotiate, not a default you accept.
Will private equity change how my clinics run?
Less than owners fear with the right partner, and more than they expect with the wrong one. Choosing the partner who changes the least is a selection criterion, and it should be part of how you compare offers.
Is private equity paying more than strategic acquirers?
It depends on the practice and the market at the time. The only reliable way to know is to have both kinds of acquirers compete for the same practice, on the same information, at the same time.
Is now a good time to sell to private equity?
The PT M&A market has not slowed down, it has become more selective. Prepared practices are commanding much stronger terms than unprepared ones, so readiness matters more than timing.
More guides: Who to hire · Prepare for sale · Valuation multiples
