The market for Ortho & MSK practices in San Jose is dynamic and full of opportunity. With significant interest from buyers, you may be wondering if now is the right time to consider a sale. Making this decision involves more than just finding a buyer; it requires understanding your practice’s true value, navigating complex deal structures, and planning for your future. This guide provides a straightforward overview to help you start the process with confidence.
Every practice owner deserves to understand their options before making any decisions.
Market Overview
Right now, the national market for orthopedic services is very strong. It was valued at over $57 billion in 2023 and is expected to grow to more than $74 billion by 2028. Here in California, we have one of the highest concentrations of orthopedic surgeons in the country, with nearly 3,000 active specialists. For a practice owner in San Jose, this means you are operating in a valuable and high-demand area. This growth attracts a wide range of buyers, from regional health systems to national investment groups, all looking to partner with successful practices like yours. The key is understanding how to position your practice to stand out in this active market.
Key Considerations Before a Sale
The financial outcome of a sale is important. But from our experience working with physicians, the right deal is about more than just the price. Before you go too far down the path, it helps to think through a few key questions.
- What is your vision for the practice’s legacy? You’ve spent years building your reputation and serving the community. The right partner will be one who respects and continues that legacy, rather than just absorbing an asset.
- How will your staff be treated? Your team is crucial to your success. A well-structured transition plan ensures your key employees are retained and incentivized, providing stability for them and the new owner.
- What role do you want to play after the sale? Some owners want to continue practicing with less administrative burden, while others are ready to retire completely. We help find partners and structure deals that align with your personal goals, whether that means staying at the helm or planning a clean exit.
Your legacy and staff deserve protection during the transition to new ownership.
Market Activity: Who is Buying?
The consolidation in the Ortho & MSK space is being driven by two main groups: private equity (PE) firms and large regional health systems. Both see the value in building networks of top-tier orthopedic providers. PE-backed groups are particularly active. In one recent year, they acquired at least 15 independent orthopedic practices to build larger platforms. These buyers are not looking for practices to “list” for sale. They are looking for strategic partners. Understanding what each type of buyer is looking for is the first step in finding the right fit for your specific goals, whether you prioritize clinical autonomy, financial upside, or a smooth transition for your team.
The Sale Process
A successful practice sale doesn’t happen by accident. It follows a deliberate, confidential process designed to maximize value and minimize disruption to your practice. While every deal is unique, the core stages are consistent.
Preparation and Valuation
This is the most important phase. We work with owners to analyze their financials, normalize expenses, and build a clear story around the practice’s strengths and growth opportunities. This results in a comprehensive valuation that is based on facts, not guesswork.
Confidential Marketing
We don’t “list” your practice. We discreetly approach a curated list of qualified buyers who we know are a good fit. This creates competitive tension to drive up value while protecting your confidentiality from staff, patients, and competitors.
Negotiation and Due Diligence
Once offers are received, we help you negotiate the best termsnot just on price, but on structure. During due diligence, we manage the flow of information to the buyer, helping you prepare for their questions and preventing the process from becoming a burden on you.
The due diligence process is where many practice sales encounter unexpected challenges.
How Your Practice is Valued
Sophisticated buyers value your practice based on a metric called Adjusted EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. More simply, it represents your practice’s true cash flow. We calculate it by taking your net income and adding back things like owner-specific perks, one-time expenses, and any above-market owner salary. For established Ortho & MSK practices, buyers typically apply a multiple of 3x to 6x on that Adjusted EBITDA figure to determine the value. The final multiple depends on factors like your provider mix, growth trends, and reliance on a single surgeon. Getting this number right is the foundation of a successful sale.
Planning Your Post-Sale Future
The day you sign the deal is not the end of the story. The structure of your sale has a major impact on your financial outcome and your role moving forward. It is important to plan for these elements from the very beginning.
| Consideration | What It Means for You | Key Question to Ask |
|---|---|---|
| Cash at Close | The guaranteed, liquid proceeds you receive on day one. | How can I maximize my after-tax cash? |
| Earnout | Additional payments tied to the practice hitting performance targets post-sale. | Are these targets realistic and achievable? |
| Equity Rollover | You reinvest a portion of your sale proceeds into the new, larger company. | Does this give me a “second bite of the apple” with a trusted partner? |
| Your Role | Defines your responsibilities, compensation, and schedule if you continue working. | Does this new role fit my ideal work-life balance? |
The structure of your practice sale has major implications for your after-tax proceeds.
Frequently Asked Questions
What is the current market outlook for selling an Ortho & MSK practice in San Jose, CA?
The market for Ortho & MSK practices in San Jose is dynamic and highly valuable due to strong national demand, with California having one of the highest concentrations of orthopedic surgeons. The market for orthopedic services was valued at over $57 billion in 2023 and is expected to grow to over $74 billion by 2028, attracting buyers such as regional health systems and national investment groups.
Who are the typical buyers for Ortho & MSK practices in San Jose?
Typical buyers include private equity (PE) firms and large regional health systems. These buyers seek to consolidate and build networks of top-tier orthopedic providers. PE-backed groups are very active, acquiring multiple independent practices to form larger platforms, focusing on strategic partnerships rather than just purchasing a listed practice.
How is the value of an Ortho & MSK practice in San Jose determined?
Practice value is primarily based on Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which represents the practice’s true cash flow by normalizing net income. Buyers usually apply a multiple of 3x to 6x on the Adjusted EBITDA, depending on factors like provider mix, growth trends, and reliance on a single surgeon.
What should I consider regarding my legacy and staff before selling my practice?
Before selling, consider your vision for the practice’s legacy and choose a partner that respects and continues this legacy. It’s also important to ensure that your staff is treated well, with a transition plan that retains and incentivizes key employees to provide stability for both your team and the new owner.
What are the key components of structuring the sale of my Ortho & MSK practice?
Key components include cash at close (immediate proceeds), earnouts (additional payments based on performance targets), equity rollover (reinvesting proceeds into the new company), and determining your post-sale role. These factors impact your financial outcome and future involvement, so plan carefully to align with your personal and professional goals.