What PT Practice Owners Should Understand About Private Equity Deals

Private equity firms have spent more than a decade building large outpatient physical therapy networks, and much of that growth has come from buying independent practices. Recent research on the sector estimates that more than 2,500 PT clinics were affiliated with private equity by 2024, and that roughly nine in ten PE transactions were “add-on” acquisitions, meaning a practice joined a platform the investor already owned.

If you own a PT practice and a buyer has reached out, it is likely a platform looking to expand its regional footprint. Publicly traded consolidators (U.S. Physical Therapy, for example) also use many of the same deal structures. Our article will cover both. 

Sellers, the more you know in advance, the better terms you can define in your deal. Before you respond to a letter of intent, you should understand how these deals are structured, what buyers examine in diligence, and what changes for you after closing.

Why Private Equity Buyers Are Interested in PT Practices Right Now

Three factors are driving buyer interest in PT practices:

• A fragmented market. Outpatient physical therapy is still fragmented, meaning most practices are still independently owned. This attracts investors who grow by acquisition. Large consolidators, including Upstream Rehabilitation, Athletico, Ivy Rehab, and ATI Physical Therapy, are now making selective tuck-in acquisitions in specific regional markets and specialty niches, according to a 2026 industry analysis from Physitrack.

  
  

• Platform exit timing. Livingstone Partners, a healthcare M&A advisor, notes that PE firms that invested in PT platforms around the pandemic are now looking toward their own exits. A platform preparing for a sale has an incentive to add clinics and revenue first, which can bring more buyers to independent owners.

  
  

• Reimbursement trends. The CY 2026 Medicare Physician Fee Schedule raised the standard conversion factor by 3.26%, the first increase after several years of cuts. The American Physical Therapy Association (APTA) estimates the net impact for physical therapy is closer to 1.75% once other adjustments are applied.

  
  

Deal Structures for PT Practices

We say this to sellers in every healthcare vertical: the purchase price in a letter of intent rarely arrives as a single cash payment at closing. Platform buyers usually combine cash with retained ownership, equity in the buyer, or payments that depend on future performance. Each piece carries a different level of risk for you as a seller.

Partial Sales and Retained Ownership

Many PT acquisitions involve selling a majority stake while you keep a minority interest. U.S. Physical Therapy's disclosed deals show how this works. In 2022, it acquired a 60% stake in a fourteen-clinic practice for about $19.3 million, with the sellers keeping 40% and eligible for additional earnouts. In 2024, it bought a 50% interest in a nine-clinic practice for $16.4 million, with the sellers retaining the other half.

If you keep a minority stake, the operating agreement governs what that stake is worth to you. Your legal team should help you review who controls major decisions, how profits are distributed, and whether the buyer has the right to purchase your remaining interest later and at what price.

Rollover Equity

PE-backed platforms often ask sellers to take part of the price as rollover equity, meaning ownership in the platform itself rather than cash. The appeal is a potential second payout when the platform is sold. The risk is that the value of that equity depends on decisions you will not control, including how much debt the platform carries and when and to whom it sells. 

Before agreeing, your attorney should help you negotiate what class of equity you are receiving, how it ranks against the investor's equity, and what happens to it if you leave the company.

Earnouts and Seller Notes

An earnout pays part of the price only if the practice hits revenue or profit targets after closing. A seller note defers part of the price into a loan you make to the buyer. 

Both tools shift risk from the buyer to you. With an earnout, the targets, how they are measured, and who controls the operations that drive them all affect whether you get paid. With a seller note, look closely at the interest rate, the payment schedule, and whether the note is subordinate to the buyer's other lenders.

State Ownership Rules Shape the Deal Structure

Whether an investor can buy your practice outright depends on your state. Some states apply a version of the corporate practice doctrine to physical therapy, which limits ownership and control of a clinical practice to licensed professionals. In California, for example, a physical therapy professional corporation generally must be owned and controlled by licensed physical therapists.

In states with these restrictions, PE buyers typically use a management services organization (MSO) structure. The investor owns the MSO, which provides administrative services such as billing, staffing, marketing, and real estate. A licensed PT continues to own the clinical practice, which pays the MSO a management fee. If you have followed how dental service organizations operate, the model is similar.

The structure has to hold up to regulatory scrutiny. A management fee that exceeds the fair market value of the services provided can be treated as improper profit-sharing with a non-licensed owner, which can raise issues under both state ownership rules and the federal Anti-Kickback Statute. If you will remain the licensed owner of the practice entity after closing, you are taking on part of that compliance responsibility, so the management services agreement deserves as much attention as the purchase agreement.

What Buyers Will Look at in Diligence

Once you sign a letter of intent, the buyer will review your practice in detail. Issues found in diligence can lower the price, add indemnification obligations, or end the deal, so it pays to know where buyers focus before you’re ever ready to sell.

• Payer mix and Medicare exposure. Buyers will look at how much of your revenue comes from Medicare, commercial plans, workers' compensation, and cash-pay patients, and how stable those contracts are. Under the 2026 fee schedule, CMS applied a 2.5% efficiency adjustment to many non-time-based codes, though most core PT codes, including 97110, 97140, and 97530, are time-based and exempt.

  
  

• Billing and documentation compliance. Expect a review of coding patterns, plans of care, and supervision of physical therapist assistants. Overpayment exposure that surfaces here often becomes a specific indemnity or escrow.

  
  

• Referral relationships. If a large share of your patients come from a small number of physician groups, buyers will ask how those relationships are structured. Any financial arrangement with a referral source will be reviewed under the Stark Law and the Anti-Kickback Statute and related state regulations.

  
  

• Clinician retention. Your therapists generate the revenue the buyer is paying for. Buyers will review employment agreements, compensation, and restrictive covenants, and may ask key clinicians to sign new agreements before closing.

  
  

• Leases. Confirm whether your clinic leases can be assigned to a buyer without landlord consent, and how much term remains on each.

  
  

Your Role After the Sale

Most platform buyers want the selling owner to stay on, at least for a transition period, and many deals depend on it. Your post-closing employment agreement will shape your day-to-day work for years, so negotiate it alongside the purchase agreement rather than after.

Employment Terms

Review your title, compensation, term length, and the grounds on which the buyer can terminate you. Pay close attention to how termination interacts with the rest of the deal. In some agreements, leaving early or being terminated for cause can reduce an earnout or trigger a buyback of your rollover equity at a discount.

Productivity Expectations

Platforms value practices on earnings, so they often introduce productivity targets for therapists, typically measured in visits per day or billable units per hour. If you or your clinicians will be held to specific benchmarks, they should be written into the agreements rather than left to later policy changes. It is important to note that such productivity targets are under increased scrutiny due to tightening corporate practice of medicine regulations across the country. Be sure to have your legal team evaluate these benchmarks to be sure they don’t come with a heavy compliance risk.

Restrictive Covenants

Expect a noncompete and nonsolicitation provision in both the purchase agreement and your employment agreement. Courts generally give more latitude to restrictions tied to the sale of a business than to ordinary employment, but enforceability still varies by state. 

Talk With a Legal Team Early

A sale to a private equity or platform buyer may be the largest financial decision of your career, and the terms that determine what you take home are often set in the first draft of the letter of intent. 

Marti Law Group works with healthcare practice owners on structuring, negotiating, and closing practice sales. If you have received an offer or are considering a sale, reach out to our team to evaluate your options before you commit.