Characterizing Financing Strategies and Private Equity Investments in Plastic Surgery Practices: A Ten-Year Analysis

SDCC 

Background: Private equity (PE) investments in plastic surgery have increased dramatically over the past several years. (1-4) However, the current literature offers limited insight into other financing strategies and attributes that can make plastic surgery practices attractive to potential investors. We aim to characterize the companies and investors involved in deals related to plastic surgery practices and to assess the financial performance of these investments.

Methods: We performed a retrospective review of deals related to plastic, reconstructive, and aesthetic surgery practices in the United States from Jan 2014 to Jan 2024 using Pitchbook, a financial database that contains public information on companies and investors. (5) Inclusion criteria were privately held companies with financial backing and companies that underwent an acquisition or merger, including chains, multidisciplinary practices, and ambulatory surgery centers. Exclusion criteria included companies without backing and publicly held companies as well as facial plastic surgery, oculoplastic surgery, dermatology, and medical spa practices without a plastic surgeon. Data were collected on types of investments, number of employees, years since founding, geographic region, city population, and last financing date and size. One-way ANOVA tests and chi-square tests were conducted, and significance level was set at p<0.05.

Results: Over the past 10 years, 136 plastic surgery practices were involved in 190 deals with 83 investors, totaling $1.2 billion. Nearly all were motivated by expansion; only one (0.7%) was triggered by bankruptcy. The most common financing strategies practices used were PE backing (n=50, 36.8%), debt financing (n=45, 33.1%), and corporate backing or acquisition (n=32, 23.5%). Practices that pursued debt financing were more likely to be founded recently than those that pursued corporate backing or acquisition (p=0.004). PE-backed deals were more likely to be larger than debt financing or corporate backing or acquisition deals (p=0.0004) with four notably large deals taking place in 2022 and 2023 ranging from $9 to $725 million.

Conclusion: While the majority of financing events are quite small and there is considerable variability in financing size within each year, there have been several large PE transactions in the past two years suggesting a changing investment landscape. Debt financing from well-known banking institutions may be critical to driving growth among younger practices. Plastic surgery practices looking to expand their footprint should be aware of all available financing strategies.

References:
1. Billig JI, Kotsis SV, Chung KC. Trends in Funding and Acquisition of Surgical Practices by Private Equity Firms in the US From 2000 to 2020. JAMA Surg. 2021;156(11):1066-1068.
2. Khetpal S, Lopez J, Steinbacher DM. Private Equity in Plastic Surgery: A Nine-Year Analysis. Plast Reconstr Surg. 2021;148(6):1088e-1090e.
3. Singer R. Private Equity and Plastic Surgery. Aesthet Surg J. Published online December 14, 2023.
4. Shaffrey EC, Attaluri PK, Wirth PJ, Rao VK. The Looming Future of Private Equity in Plastic Surgery. Aesthet Surg J. Published online December 27, 2023.
5. Pitchbook, Seattle, WA.

Practice Management

PSTM 2024