What is a MEIP in a healthcare PE deal?
A MEIP (management equity incentive plan) is the equity pool a PE buyer sets aside to retain and motivate the leadership team of an acquired practice through the hold period and exit.
Quick answer
A management equity incentive plan (MEIP) is a pool of equity, typically 8 to 15 percent of the post-close cap table, reserved for executives and key providers who stay with the platform, paying out at the next liquidity event.
The detail
PE buyers do not run practices. They buy the team that does. A MEIP is how they keep that team aligned through the hold period. The typical pool runs 8 to 15 percent of the fully-diluted cap table, granted to a small group of executives and physician leaders. Grants usually vest over 4 to 5 years with a liquidity-event trigger (the next exit). Structures vary: time-vesting options, performance-based restricted shares, or profits interests for LLC structures. Selling physicians who remain in the platform after close usually get a MEIP grant in addition to their rollover equity. The key questions to ask: what is the strike price or threshold value, does the MEIP participate pari passu with the PE sponsor, what happens if you are terminated, and what is the vesting acceleration on a change of control. These questions are boring until they are not, which is usually at the exit, when getting the answers wrong costs real money.
MEIP pools in healthcare PE deals typically represent 8 to 15 percent of the fully-diluted cap table.
Source: Bain & Company Healthcare PE
ABA Business Law Section notes MEIP terms (vesting, acceleration, strike price) are among the most negotiated provisions in PE recapitalizations.
Source: ABA Business Law Section
What this means for clinic owners
From Sorso
Rollover equity and MEIP grants are two different instruments with different economics. Understand which one you are receiving and what it actually pays out under realistic and pessimistic scenarios, not just the glossy deck model.
Related questions
How do PE firms value medical practices?
Private equity firms value medical practices primarily on a multiple of trailing twelve-month adjusted EBITDA, typically 5x to 12x, with the multiple driven by scale, growth, payer mix, and provider retention.
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.
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.
What is rollover equity in a practice sale?
Rollover equity is the portion of sale proceeds that the selling owner retains as equity in the buyer's platform, typically 15 to 30 percent of total consideration, creating a second liquidity event when the platform is later sold.
Founder of Sorso. 19 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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