Who is acquiring PT practices and what are they paying?

The short answer

Who is actively acquiring physical therapy businesses, and what are they selling for? The market for PT businesses under $10 million of EBITDA is strong, with more than 25 active acquirers across the country. Joseph Anzur, Managing Director of Mergers and Acquisitions at Martin Healthcare Advisors, gives a field update.

In this video:

• Most acquirers are backed by private equity
• The list narrows by geography, size, and practice type. Specialty practices such as pediatrics, pelvic health, and sports can command a premium.
• Timing matters: some acquirers are buying now, others are preparing for a recap
• What to watch: interest rates, inflation, and recaps of the largest platforms

For current valuation ranges by practice size, see MHA's published PT practice valuation multiples.

Full transcript

The acquirer list is longer than most owners think, and shorter than it looks once you filter for who actually closes. The market right now for physical therapy businesses under 10 million of EBITDA is strong. There are more than 25 active acquirers across the country. The large majority are backed by private equity, and one of them, U.S. Physical Therapy, is public.

That list of course gets shorter once you begin to filter for a variety of factors: your geography, the size of your business, and the type of practice you run. Specialty practices typically sell at a premium: pediatrics, pelvic health, practices focused on sports injuries. And again, that depends on geography as well.

Timing matters, too. Every strategic backed by private equity is somewhere in its own life cycle. Some are very actively acquiring right now. Others are tightening up their business, getting ready for a recap, which is when they sell to their next investor. You could be hitting either one.

Valuation multiples are strong. Small practices are selling in a range of 2 to 4 times EBITDA, medium-size practices 4 to 7, and large practices somewhere in the 7 to 10 range. Know that this can vary depending on a lot of factors in a particular business.

The encouraging part is that new acquirers keep coming into the market every few months, it seems. Some of them have grown fast; others have struggled because they have not found the right structure for business owners in the rehab industry. Keep an eye on economic factors, especially interest rates and inflation. The other thing to watch is the bigger companies, specifically the ones over 20 million of EBITDA, and whether they can get a recap or a sale of their business done. That is going to have a big impact on investors in this industry and eventually trickle into more activity for smaller practices down the line.

Transcript lightly edited for readability.