Guide to Selling a GI & Hepatology Practice in South Dakota

Executive Summary

If you own a Gastroenterology & Hepatology practice in South Dakota, you are likely aware of the shifting healthcare landscape. National trends of market consolidation and rising patient demand are creating significant opportunities for physician owners. Navigating this environment to achieve your financial and personal goals requires a clear understanding of your practice’s value and a well-defined strategy. This guide provides the insights you need to start the process.

Market Overview

The market for GI practices is experiencing a period of intense activity. Large physician practice management (PPM) companies, many backed by private equity, are actively seeking to expand their networks. They are drawn to the specialty’s strong fundamentals. An aging population and updated cancer screening guidelines at age 45 are fueling a steady rise in patient demand.

For you as a practice owner in South Dakota, this is made more significant by a projected national shortage of gastroenterologists. With only 56 GIs currently in the state, your established practice and provider team represent a scarce and valuable asset. Buyers are not just acquiring a business. They are acquiring a strategic foothold in a region with high barriers to entry and growing demand.

Key Considerations

When preparing for a sale, sophisticated buyers look far beyond your top-line revenue. They analyze the underlying structure and efficiency of your operations. Understanding these key value drivers is the first step to maximizing your outcome.

The Power of Ancillary Services

Many GI practices leave significant value on the table by not optimizing their ancillary services. An in-house ambulatory surgery center (ASC) is the most common and powerful value driver, generating high-margin facility fees. With recent CMS proposals suggesting a 7-9% reimbursement increase for ASCs, their value is only growing. Other services like in-house anesthesia, pathology, or infusion therapy can also dramatically increase profitability and, consequently, your practice’s valuation.

Your Provider and Team Structure

Is your practice’s success tied entirely to you, the owner? Or do you have associate physicians with a track record of productivity? A practice that can demonstrate stable revenue without being 100% reliant on the owner is inherently less risky to a buyer and will command a higher valuation.

Market Activity

While the frenetic pace of transactions seen in 2021 has leveled off, the market for GI practices remains robust. We now see a “flight to quality,” where buyers are more selective but are willing to pay premium valuations for strong, well-prepared practices. Today’s buyers are sophisticated and backed by deep analytical resources.

Valuation multiples can vary significantly. A smaller, single-physician practice might see a mid-single-digit multiple of its earnings. A larger group with multiple providers and a profitable, co-located ASC could command a valuation in the high single or even low double-digit range. Knowing where your practice fits on this spectrum is critical. Getting the timing right can be the difference between an average result and a life-changing one.

The Sale Process

Selling your practice is not a single event but a multi-stage process. A well-managed process protects your confidentiality, creates a competitive environment among buyers, and prevents surprises that can derail a transaction. Here is a simplified look at the path.

1. Preparation and Valuation. This is the foundational step. We work with you to analyze your financials, normalize your earnings, identify value drivers, and create a compelling narrative about your practice’s future growth.

2. Confidential Marketing. We do not “list” your practice. We run a confidential, targeted process, discreetly approaching a curated list of qualified strategic and financial buyers who we know are a good fit.

3. Negotiation of Offers. By creating a competitive dynamic, we help you negotiate the best possible terms, not just on price but also on structure, employment agreements, and your future role.

4. Due Diligence and Closing. This final phase is an intensive review of your financial, clinical, and operational records by the buyer. Thorough preparation is key to ensuring a smooth process and preventing buyers from trying to re-negotiate the price at the last minute.

Valuation

How do buyers determine what your practice is worth? They typically start with a metric called Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This is not the same as the net income on your tax return. It is a measure of your practice’s true cash flow, adjusted to remove owner-specific expenses and one-time costs.

That Adjusted EBITDA is then multiplied by a number, the “multiple,” to arrive at your enterprise value. This multiple is not arbitrary. It is influenced by risk and growth potential. The table below shows how different factors can impact the multiple a buyer is willing to pay.

A proper valuation tells a story, combining the math with your practice’s unique strengths to justify the highest possible multiple.

Post-Sale Considerations

The transaction is not the end of the story. Your life after the sale depends heavily on the type of partner you choose. A hospital acquisition might feel familiar, but it often results in becoming an employee with a focus on your personal compensation package.

A partnership with a private equity-backed platform is different. These deals typically provide a larger upfront cash payment. They also give you the opportunity to “roll over” a portion of your sale proceeds (typically 20-40%) into equity in the new, larger organization. This structure aligns your financial interests with your new partner and gives you a “second bite of the apple” when the larger platform is eventually sold. Many physicians find this model preserves more clinical autonomy than a hospital sale. Defining what you want your future to look like is just as important as determining your practice’s price.