The market for ABA therapy practices in Denver is active, presenting a significant opportunity for practice owners considering their next steps. Private equity interest is high, and valuations can be strong for well-run clinics. However, achieving a premium price requires more than just having a profitable practice. It demands careful preparation, strategic positioning, and a deep understanding of what buyers in this specific market are looking for. Successfully navigating this process is the key to capitalizing on your hard work.
Market Overview
You operate in a seller s market, but it s one with high expectations. The demand for quality ABA therapy in the Denver area is strong, fueled by growing awareness and expanding insurance coverage. This has attracted numerous buyers, from private equity firms to larger strategic health systems. They are not just buying a business. They are investing in a platform for growth.
Here is what defines the current Denver ABA market:
- High Buyer Interest. Private equity has been active in behavioral health since 2012, and ABA therapy is a prime target. Buyers are looking for established practices to use as a foothold in the growing Denver market.
- Focus on Operations. A buyer’s first question will be about your business. They want to see strong operational efficiency, high client retention rates, and clean financial records. Most independent practices in this space report annual revenues of $5 million or less, making streamlined operations a key differentiator.
- Value in Clinical Quality. Favorable insurance contracts, especially commercial ones, add significant value. Buyers also look at client outcomes and any data you have on patient improvement. A practice that can demonstrate a value-based care model is very attractive.
Key Considerations
Beyond the financials, buyers scrutinize the risks. In Denver, one known challenge is the difficulty some families have in getting ABA services approved in schools, despite state laws. If your practice relies heavily on school-based referrals, a potential buyer will see this as a risk. You need a clear story for how you navigate this landscape and maintain a diverse referral stream. Similarly, buyers prize stability. A practice with a full team of qualified staff, especially BCBAs, is seen as “turnkey” and commands a higher value. A practice heavily dependent on the owner for all key functions is a much harder sell. Thinking through these issues is a critical part of pre-sale planning.
Market Activity
The most significant trend in ABA practice M&A is the role of private equity (PE). These are not local competitors. They are sophisticated financial buyers who look at dozens of practices a year. They know what to look for and how to structure deals to their advantage. Responding to a single inbound offer rarely results in the best outcome. To maximize your value, you need to create a competitive environment where multiple qualified buyers are brought to the table. We don’t just “list” your practice; we run a formal process designed to protect your interests.
Here s a look at how the two approaches typically compare:
| Feature | Responding to a Single Offer | A Managed Sale Process |
|---|---|---|
| Valuation | Based on the buyer’s model and motivation. | Established by creating a competitive market. |
| Negotiation | Limited leverage for the seller. | Multiple bidders create leverage on price and terms. |
| Confidentiality | Higher risk of leaks as the buyer controls info. | Controlled through a structured, confidential process. |
| Deal Structure | Often favors the buyer’s tax and risk profile. | Structured to optimize the seller s net proceeds. |
Sale Process
Many owners think about selling only when they are ready to exit. In our experience, the best time to start preparing is two to three years before your target sale date. Buyers pay for proven, documented performance, not just potential. The process begins with getting your house in order. This involves a deep dive into your financials and operations to build a compelling story backed by data. It continues with a professional valuation, confidential marketing to a curated list of buyers, and careful management of negotiations. The final stage, due diligence, is where buyers scrutinize everything. This is where unprepared sellers often face challenges that can lower the price or even kill the deal. Proper planning and preparation are your best defense.
Valuation
The most common question we hear is, “What is my practice worth?” The answer is based on a simple formula: Adjusted EBITDA x a Multiple. However, getting those two numbers right is a detailed process.
Understanding Your Practice’s True Earnings
Buyers value your practice based on its sustainable cash flow, or Adjusted EBITDA. This starts with your net income but adds back interest, taxes, depreciation, and amortization. Critically, we then “normalize” it by adjusting for any one-time expenses or owner-related costs that a new owner would not incur, like an above-market salary or personal auto lease. Many owners are surprised to learn their practice s Adjusted EBITDA is significantly higher than they thought. We have helped owners increase their calculated EBITDA through this process alone.
What Is a Fair Multiple?
For ABA therapy practices, a typical valuation multiple can range from 6x to 8x Adjusted EBITDA. For smaller one-to-two clinic operations, this can be closer to 3x to 6x. Where your practice falls in that range depends on several factors:
- Scale. A practice with higher EBITDA is seen as less risky and earns a higher multiple.
- Payer Mix. A strong base of commercial insurance contracts is more valuable than heavy reliance on a single government payer.
- Team Strength. A practice that can run without the owner’s daily involvement is worth more.
- Growth Story. Demonstrating clear, achievable avenues for future growth will earn a premium.
Post-Sale Considerations
The day the deal closes is not the end of the story. The structure of your sale has lasting implications for your finances, your legacy, and your team. Many deals today include more than just cash at closing. You might negotiate an “earnout,” where you receive additional payments over the next few years for hitting certain performance targets. Another common structure is an “equity rollover,” where you retain a minority stake in the new, larger company. This allows you to benefit from the future growth of the platform and get a “second bite at the apple” when the PE firm sells it again years later. These structures can help you stay involved if you choose and ensure the practice culture you built is protected. Planning for this transition is just as important as negotiating the price.
Frequently Asked Questions
What is the current market demand for ABA therapy practices in Denver?
The market for ABA therapy practices in Denver is active with high buyer interest, especially from private equity firms. The demand is driven by growing awareness and expanding insurance coverage, making it a seller’s market with strong valuations for well-run clinics.
What operational aspects do buyers focus on when evaluating an ABA therapy practice?
Buyers prioritize strong operational efficiency, high client retention rates, clean financial records, and well-documented clinical outcomes. Practices demonstrating a value-based care model and holding favorable commercial insurance contracts are particularly attractive.
How does the sale process work for an ABA therapy practice in Denver?
Selling a practice is best planned 2-3 years before the target sale date. It starts with organizing financials and operations, followed by professional valuation, confidential marketing to qualified buyers, and careful negotiation. Due diligence is critical and can be a major hurdle if the practice is not well-prepared.
What factors influence the valuation multiple of an ABA therapy practice in Denver?
Valuation multiples typically range from 6x to 8x Adjusted EBITDA for larger practices and 3x to 6x for smaller clinics. Factors influencing the multiple include practice scale, payer mix (commercial insurance vs. government payers), strength of the team (ability to operate without the owner), and growth potential.
What are common post-sale structures and considerations for ABA therapy practice sellers?
Post-sale considerations often include earnouts for future performance targets, equity rollovers allowing owners to retain a minority stake, and the option to stay involved in the practice. These structures help protect the seller’s financial interests, legacy, and practice culture beyond the sale.