The AMSPA 2025 trade show in Las Vegas brought together key figures in the medical aesthetics industry, offering insights into market trends and private equity’s role. Drew Smyth, Vice President of Mergers and Acquisitions at Aesthetic Brokers, shared his expertise on consolidation in med spas and what it means for practice owners looking to sell.
Private Equity’s Role in Medical Aesthetics
Private equity’s interest in medical aesthetics continues to grow. Smyth stated, “I think it’s safe to say that the secret’s out regarding where we are in consolidation for med spas. We’ve seen it in several different industries, specifically in healthcare.” This shift presents an opportunity for practice owners. “It’s safe to say people are coming around to the idea that they can sell what they’ve worked so hard to build and, you know, make quite a bit of money off of it while having a better quality of life post-transaction.”
Smyth expects this trend to accelerate. “I think 2025 will be a very productive year for the transaction landscape and med spa specifically.”
What Attracts Buyers?
Smyth highlighted key factors that make a med spa attractive to buyers. The high overarching theme here is around EBITDA, right? You hear EBITDA thrown around all the time.” EBITDA, or Earnings Before Interest, Taxes, Depreciation, and Amortization, is a crucial metric, with adjusted EBITDA carrying even more weight.
Provider dependency is another concern. “If you have one injector, for instance, that is producing more than 50 percent of the revenue of that practice, that is what a buyer would consider a risk.” Buyers prefer balanced revenue across multiple providers.
Financial efficiency is also critical. “You want to ensure you’re not too bloated in one expense area. Do you have too much staff? Do you have duplicate staff job descriptions?” Keeping expenses in check enhances profitability and makes a business more appealing.
Adding New Services: Pros and Cons
Expanding service offerings, such as peptides or GLP-1 medications, is a common strategy, but Smyth cautioned against expecting immediate financial returns. “I would say that the future of those is probably unknown. I don’t know how much value a buyer puts on that because it is unknown.”
An earn-out structure may apply if new services are already implemented and profitable. “They’re essentially giving you credit for what you’ve already implemented, understanding that there is future value there.”
Employee Retention Matters
A stable workforce is attractive to buyers. “It’s a positive if you have employees that have been there for multiple years. You don’t have a lot of turnover. You’re a very stable business from a staff perspective, right?”
Private equity firms may offer incentives for high-producing providers to keep them post-sale. “They don’t want this transaction to cause a high producer to leave because they’re uncertain about their future there. So they’re trying to mitigate that risk by giving them some skin in the game.”
Planning for a Successful Sale
Smyth advised owners to stay financially disciplined. “Keep an eye on your profit and loss statements and make sure that your expenses, as they relate to the revenue you’re producing, align with what the market is doing.” Key considerations include monitoring patient acquisition costs, staffing ratios, and operational expenses.
Major capital expenditures or staffing changes should be avoided for those considering a sale soon. “If you know that you want to sell your practice in, you know, next few months making big hires, spending a lot of money on a lot of capital on equipment and things like that, probably not a great idea.”
Takeaway
The AMSPA 2025 trade show underscored private equity’s increasing influence on medical aesthetics. To maximize value, practice owners should assess their businesses for financial strength, revenue distribution, provider retention, and service offerings.
Seeking expert guidance from M&A professionals like Drew Smyth can help owners navigate the complexities of selling a practice. As Smyth put it, “Healthy EBITDA margins are what buyers and private equity are looking for. Right.”
Listen to the full episode on Spotify: Aesthetics Appeal
