Selling Your Medical Practice: What Physicians Need to Know Before a Sale

If you have spent years building your medical practice, the idea of selling it (or even bringing in outside investors) can feel exciting and overwhelming at the same time. Maybe you have had a conversation with a private equity firm. Maybe a larger group reached out about a merger. Or, maybe you are simply wondering whether now is the right time to take some chips off the table.

Wherever you are in that journey, understanding the landscape before you enter negotiations may be the most important thing you can do to protect yourself and your practice. This article is the first in a series designed to help you navigate the landscape or selling your medical practice. 

Here’s what we’ll cover: 

• Foundational concepts behind healthcare transactions

• Sophisticated deal structures, including management services organizations (MSOs), capital raises, and platform acquisitions 

• How these transactions are structured

• Why buyers pursue them

• What they mean for physician owners

  
  

Whether you are a solo physician considering your first deal or a group practice operator who has already had preliminary conversations with institutional buyers, this series will provide the practical framework you need to make informed decisions with confidence.

Need some basics on healthcare M&A terminology? Start here.  Next, read this article for considerations to make before you sell. 

The Changing Healthcare M&A Landscape

Traditional physician-to-physician practice sales still happen. A retiring doctor sells to a younger one. A small group consolidates with a neighboring practice. These transactions are often relatively straightforward, and they will continue to play an important role in the healthcare marketplace.

Today’s market, however, is increasingly shaped by institutional capital. Over the past decade, private equity firms and other institutional investors have invested hundreds of billions of dollars into healthcare, acquiring practices across nearly every specialty:

• Dermatology

• Primary care

• Behavioral health

• Dentistry

• Medical aesthetics

• Optometry and ophthalmology

• Veterinary

• And more

  
  

Rather than simply purchasing individual practices, these investors typically pursue a broader strategy: acquiring multiple practices, integrating them into larger regional or national organizations, and creating scalable platforms that can later be sold to larger PE sponsors or, in some cases, taken public.

This shift has fundamentally changed the market for physician practices. Even if you are not actively considering a sale, your practice may already be on the radar of institutional buyers. And if you are exploring a transaction, it is essential to understand that selling to a private equity-backed organization or other strategic investor is fundamentally different from selling to another physician.

Institutional buyers evaluate opportunities through a different lens. They focus on financial performance, operational scalability, growth potential, provider retention, and the ability to integrate your practice into a larger platform. Their transaction process is typically more structured, more data-driven, and considerably more complex than a traditional practice sale.

Asset Sale vs. Equity Sale: the first question to ask

Before you can evaluate any offer, you need to understand the basic deal structure being proposed. Most healthcare transactions are structured as either an asset sale or equity sale. The difference has significant legal, tax, and operational implications and can materially affect both the value of the transaction and your post-closing obligations.

In an asset sale, the buyer purchases specific assets of your practice (equipment, contracts, intellectual property, patient relationships, goodwill) without taking on the legal entity itself. The practice entity remains yours; the buyer gets what is inside it. These are common in physician practice acquisitions because they give buyers a cleaner start and allow them to choose which assets to acquire and which liabilities to leave behind.

In an equity sale, the buyer acquires ownership of the entity itself, meaning they step into your shoes as the owner and assumes control of the business as a going concern, along with its assets, contracts, and, in many cases, its existing liabilities. Equity sales are more common in larger platform transactions, where maintaining continuity of contracts, licenses, vendor relationships, and operating history is strategically important.

Neither structure is inherently better for a physician seller. It depends on the specifics of your practice, your tax situation, your liabilities, regulatory considerations, and what the buyer is trying to accomplish. In some cases, a buyer’s preferred structure may be negotiable; in others, it may be driven by financing, compliance, or operational requirements.

The important takeaway is that you should never let a buyer dictate the structure without understanding what it means for you, and that conversation needs to happen with your legal and tax advisors before you sign a letter of intent or respond to any offer.

Institutional Buyers Underwrite Differently

When another physician buys your practice, they are often buying more than a business; they are often buying a career. They are evaluating whether the practice fits their clinical model, whether patients will stay, and whether the financials support the purchase price. It is a personal and often relationship-driven process.

Institutional buyers, such as PE firms and strategic acquirers, are doing something different. They are underwriting an investment. They are asking: 

• What does this practice look like as part of a larger platform? 

• What are the normalized earnings? 

• What is the growth potential? 

• What are the operational risks? 

• What does the regulatory exposure look like?

  
  

This changes the due diligence process entirely. Where a physician buyer might spend a few weeks reviewing financials and doing a site visit, an institutional buyer will run a full diligence process that can last months and covers everything from your billing practices and payor contracts to your employment agreements, real estate arrangements, licensing status, and compliance history. Virtually every aspect of the practice is examined.

This level of scrutiny is not something to fear, but it is something to prepare for. Practices that have clean operations, well-documented financials, and no regulatory skeletons command higher valuations, and move through diligence more efficiently. Practices that have not thought about this until the buyer’s diligence team arrives often lose value, delay closings, or watch deals fall apart entirely.

The practices that achieve the best outcomes are those that are most prepared.

The Letter of Intent Is Not “Just a Starting Point”

One of the most common mistakes physicians make early in a transaction is treating the letter of intent as a non-binding formality that can be cleaned up later. It is not.

Although most LOIs are technically non-binding with respect to the final purchase agreement, they establish the commercial framework for the entire deal to be negotiated around. The purchase price, the structure, the equity rollover mechanics, the exclusivity period, the timeline are typically negotiated at the LOI stage. Once you sign, you are committed to an exclusive negotiating period with that buyer, usually for 60 to 90 days, and the psychological anchor of the agreed terms makes it very difficult to renegotiate later without real leverage.

That means before you sign an LOI, you need to understand exactly what you are agreeing to and what is missing. Vague language in an LOI about post-closing employment, equity rollover amounts, or earnout mechanics is frequently resolved in the buyer’s favor when the definitive documents are drafted. Your legal and financial advisors should review the LOI with the same level of care they would apply to the purchase agreement itself, pushing for specificity on every key economic and business term that matters to you.

What “Bigger Deals” Actually Look Like

As you think about entering a larger transaction, whether that is a PE-backed acquisition, an MSO structure, or a capital raise, the fundamental question shifts from “what is my practice worth?” to “what am I building, and who do I want to build it with?”

Unlike a traditional sale, institutional transactions are rarely all-cash exits. Most require physician owners to roll over a portion of their proceeds into the acquiring platform, leaving them with an ownership stake in the larger enterprise. The goal is to align incentives: the physicians continue to help grow the business while sharing in the platform's future appreciation.

That future value, however, is far from guaranteed. The return on your rollover equity depends on how that rollover equity is structured, what rights attach to it, liquidity provisions, and what the platform ultimately achieves. Two offers with the same valuation can produce dramatically different financial outcomes depending on the rollover terms and the rights associated with the retained equity.

These are not details to sort out after the term sheet. They are the deal.

Coming Next In This Series from Marti Law Group

Healthcare is one of the most heavily regulated and legally complex industries in the country. The deals being done in this space are increasingly sophisticated, and every physician considering a sale needs to be prepared.

Over the next several months, this series will walk through the legal and structural building blocks of larger healthcare transactions:

• How PE roll-ups work and what it means to be a platform

• The deal terms that define PE-backed transactions: equity, earnouts, indemnification, and rollover mechanics

• MSO structures: what they are, how they are built, and how they attract institutional capital

• What the capital-raising process actually looks like

• How to negotiate investor rights without giving away control of your business

• The regulatory frameworks: Stark Law, Anti-Kickback, HIPAA

• How to engineer an exit that commands a premium

The physicians and practice operators who do well in these transactions are not necessarily the ones with the largest practices or the most impressive financials, but the ones who understood the process, had the right advisors, and made informed decisions at every stage. Reach out to our team to get started.