Partnering with a private equity (PE) investor can help physicians monetize the value of their practice.
Why treat your practice differently than other assets in your retirement portfolio?
A PE transaction will provide an up-front cash payment and/or rollover equity in the PE platform. Up-front cash, usually 70-80% of the “real value” of your practice, is calculated on a multiple of the practice’s free cash flow or earnings before interest, taxes, depreciation, and amortization (or “EBITDA”). The remaining balance of purchase price (20%-30%) is usually paid in the form of rollover equity.
Rollover equity converts to additional cash payments upon a secondary sale to another investor down the road. Further, many PE transactions are structured so that if a physician retires, becomes disabled, or dies, his/her rollover equity is purchased at its then fair market value.
Stay tuned for more top considerations for physician groups evaluating PE.
To learn more, join us for our Physician Transactions 2020 webinar series.
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