How do I evaluate a PE offer?
Evaluate a PE offer on six dimensions: enterprise value multiple, cash at close percentage, rollover equity terms, post-close compensation structure, earnout conditions, and platform exit timing assumptions.
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Definition
Evaluating a PE offer means analyzing total economic value across cash, equity, and post-close compensation over the full hold period, not just the headline price.
The detail
Six dimensions matter. Enterprise value multiple: compare against current market multiples for your size and specialty; the headline number should be in market range. Cash at close: the rest of the price comes as rollover equity and sometimes an earnout, and Foley & Lardner notes rollover can reach up to 40 percent of the value of the recapitalized practice in larger deals; the less cash at close, the more of your outcome rides on the next sale. Rollover equity: structure (preferred or common), participation in next exit, anti-dilution protection, governance rights. Post-close compensation: your pay after closing is set by a new compensation plan, so model it line by line against what you take home today. Earnout: tied to retained EBITDA, what trigger thresholds apply, what is the cure period for missed years. Platform exit timing: the median PE hold period is now 6.0 years, the longest Private Equity Info has recorded; ask the buyer where they are in the cycle. The single most important question to ask: what is the PE firm's track record of second-exit returns to physician sellers in their prior platforms? That answer predicts your outcome better than any other data point. Always run a competitive process with at least three buyers; first offers are rarely the best offers.
A quality of earnings report typically costs $15,000 to $50,000 for businesses with $5M to $50M in revenue, depending on deal size, financial complexity and whether it is buy-side or sell-side.
Source: Breakwater M&A: Quality of earnings report cost (Sep 2026)
The median holding period for private-equity-backed portfolio companies has reached 6.0 years, the longest since Private Equity Info began tracking it.
What this means for clinic owners
From Sorso
The headline multiple is the easy part to evaluate. The hard part is modeling compensation, equity outcomes, and lifestyle changes across the whole hold period, which runs 6.0 years at the median. If you cannot do that model yourself, hire someone who can before you sign anything.
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What is a dermatology practice worth?
A dermatology practice typically sells for 3x to 5x EBITDA as a solo practice and 4x to 7x as a small group of one to four locations, according to Scope Research's 2026 dermatology update. Large and mid-sized groups with $15M to $50M of revenue reach 7x to 10x, and large integrated platforms 12x to 15x. Scope names in-house pathology, Mohs surgery and cosmetic services as things that can lift margins, but it puts no premium in turns on any of them.
How do PE firms value medical practices?
Private equity firms value a medical practice as a multiple of its trailing-twelve-month adjusted EBITDA, and the multiple rises with scale. Published ladders run from 2.5–4x for a single owner-operated physical therapy clinic (Breakwater M&A) to 10x–20x for large primary care platforms (Scope Research), and payer mix, growth and owner dependence move a practice within its band.
Should I sell my practice to private equity?
Selling to private equity makes sense if you want partial liquidity, want to grow with capital and infrastructure, and are willing to operate as a partner rather than sole owner; it is wrong if you want full retirement or full operational autonomy.
What is the 8-minute rule in physical therapy billing?
The 8-minute rule is a Medicare billing rule that determines how many timed CPT units (97110, 97140, etc.) a PT can bill based on total minutes spent on direct one-on-one timed services, with a single unit billable at 8 minutes minimum.
What is a MEIP in a healthcare PE deal?
A management equity incentive plan (MEIP) is a pool of equity reserved for executives and providers who stay with the platform after a PE deal, paying out at the next liquidity event. In WTW's 2026 survey of 47 PE-backed companies, the median pool was 10% of undiluted shares, and 75% of it was granted up front.
What is an IOI in healthcare M&A?
An indication of interest (IOI) is a non-binding preliminary bid, usually providing a price range rather than a specific number, submitted after a buyer reviews the confidential information memorandum but before full diligence or LOI.
What is a non-compete in a healthcare practice sale?
A non-compete in a healthcare practice sale restricts the selling physician from opening or joining a competing practice within a defined radius and time period after closing. Courts enforce sale-based covenants more readily than employment ones; for dental practice sales, Jaffe Law says they often run 15 to 20 miles and 3 to 5 years, and state law decides what holds.
How much does a quality of earnings report cost for a medical practice?
A quality of earnings (QoE) report for a medical practice typically costs $10,000 to $75,000 for practices with under $10M of EBITDA, based on Breakwater M&A's published fees: $10,000 to $25,000 under $1M of EBITDA, $15,000 to $40,000 at $1M to $3M, and $25,000 to $75,000 at $3M to $10M. Larger groups with $10M to $25M of EBITDA pay $50,000 to $150,000. A sell-side report typically costs 10 to 20 percent less than a buy-side one, and Breakwater's figures cover businesses generally, not healthcare specifically.
Founder of Sorso and a CFA charterholder. Before Sorso, Stan spent 19 years in corporate finance at institutions including UniCredit and Société Générale — managing a $450M loan portfolio and making senior partner at a major mezzanine lender by 29 — then built a fractional CFO firm exclusively for outpatient healthcare clinics.
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