The market for Gastroenterology and Hepatology practices is changing rapidly. National consolidation, driven by private equity investors, presents a significant opportunity for practice owners in Louisville. If you are a GI physician-owner, understanding these market dynamics is the first step toward a successful and profitable exit. This guide provides a clear overview of the current landscape, key valuation drivers, and the process of selling your practice on your terms.
Not sure if selling is right for you? Our advisors can help you understand your options without any pressure.
Market Overview: A Window of Opportunity in Louisville
If you own a GI & Hepatology practice, you are likely aware of the increasing interest from outside groups. This is not a coincidence. The market is active, and Louisville practice owners are in a strong position.
Why GI is in High Demand
Investors are focused on GI for several key reasons. Favorable demographic trends, like an aging population, and lowered screening age recommendations for colorectal cancer create a steady, growing demand for services. More importantly, GI practices offer multiple streams of revenue beyond consultations. These ancillary services are major value drivers.
The Louisville Landscape
In a competitive healthcare hub like Louisville, a well-run GI practice is a prime target for both strategic buyers, like hospital systems, and financial buyers, such as private equity (PE) firms. National trends show that only about 10% of GI physicians are currently part of a consolidated platform. This means there is significant room for growth and partnership, creating a competitive environment for high-quality practices like yours.
Key Considerations for Your GI Practice
When a buyer looks at your Louisville practice, they see more than just patient volume. They are analyzing the business’s core strengths and growth potential. To prepare for a sale, you should focus on what makes your practice most attractive.
For GI & Hepatology practices, the most important drivers of value are often the ancillary services you provide. Before you begin the sale process, it is important to understand how these services contribute to your bottom line.
- Ambulatory Surgery Centers (ASCs). If you have an ASC, it is one of your most valuable assets. Buyers are very interested in the facility fees generated from procedures like colonoscopies and endoscopies.
- In-House Anesthesia. Bringing anesthesia services in-house, often through a separate but related company, is a major source of revenue that directly increases practice profitability.
- Infusion Therapy. Providing infusion for chronic conditions like Crohn’s disease and ulcerative colitis adds a high-margin, recurring revenue stream that is very attractive to buyers.
- Pathology. An in-house pathology lab for analyzing biopsy samples captures another profitable part of the patient care journey.
Properly structuring and reporting the financials for these services is a critical step. It can dramatically increase what a buyer is willing to pay.
Market Activity: What Buyers Are Paying Now
While transaction activity has stabilized since its peak, high-quality GI practices remain in high demand, commanding strong valuations. Understanding current valuation multiples is the first step toward knowing what your practice could be worth.
Valuation is typically based on a multiple of Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This multiple can vary based on your practice’s size, location, and the strength of your ancillary services. For GI practices, current market activity shows strong interest.
Here are the typical valuation ranges we are seeing in the market today for profitable GI practices.
| Asset Type | Typical EBITDA Multiple Range |
|---|---|
| Stand-Alone GI Practice | 10x – 13x |
| GI-focused Surgery Center (ASC) | 8x – 9x |
| Smaller “Tuck-In” Practice | 5x – 7x |
To get a valuation at the top end of these ranges, your practice’s financial story must be presented clearly and professionally. This is where preparation meets opportunity.
Curious how your practice compares to others in your specialty that have recently sold?
The Sale Process: A Step-by-Step Overview
Selling your practice is a structured process, not a single event. Knowing the key stages helps you prepare for what is ahead and avoid common pitfalls. We believe a well-managed process protects you and maximizes your outcome.
Step 1: Preparation and Strategy
This is the most important phase. It happens long before your practice is on the market. Here, we work with owners to review financials, optimize ancillary revenue, and prepare the “story” of the practice that will be presented to buyers. This is also where we help you define your personal and financial goals for the sale.
Step 2: Valuation and Marketing
Once the practice is prepared, a formal valuation is conducted to establish a supportable asking price. Then, the opportunity is confidentially marketed to a curated list of qualified buyers, including both private equity groups and strategic healthcare systems. The goal is to create a competitive environment.
Step 3: Due Diligence and Closing
After you accept an offer, the buyer will begin due diligence. This is a deep dive into your financial, operational, and clinical records. Many deals encounter problems here if the initial preparation was not thorough. With proper planning, this stage is a smooth confirmation of the details. The process concludes with the negotiation of the final legal agreements and the closing of the transaction.
Preparing properly for buyer due diligence can prevent unexpected issues.
Valuation: Understanding Your Practice’s True Worth
Valuation is more than a simple formula. It is about telling the right financial story. The single most important metric in any practice sale is Adjusted EBITDA. It is the baseline figure that buyers use to determine what they are willing to pay.
Many practice owners are surprised to learn their practice is worth more than their tax return suggests. This is because buyers are interested in the true, ongoing cash flow of the business. Here is how we get to that number.
- Start with Net Income. We begin with the standard net income or profit shown on your Profit & Loss statement.
- Add Back Non-Cash Expenses. We add back interest, taxes, depreciation, and amortization.
- “Normalize” for Owner Expenses. This is the critical step. We identify and add back owner-related expenses that a new owner would not incur. This includes things like an above-market owner’s salary, personal auto leases, or family members on payroll who are not active in the business.
The result is your Adjusted EBITDA. This higher, more accurate number, when multiplied by the market rates we discussed earlier, represents the true enterprise value of your practice. Without this step, you could leave a significant amount of money on the table.
A comprehensive valuation is the foundation of a successful practice transition strategy.
Post-Sale Considerations: What Happens Next?
Selling your practice is the beginning of a new chapter, not just an end. The structure of your deal will determine what your role, compensation, and financial future look like after the sale closes. It is important to negotiate these terms carefully.
Partnering with Private Equity
A sale to a PE-backed platform often involves a significant cash payment upfront. You will also typically “roll over” a portion of your proceeds, usually 20-40%, into equity in the new, larger company. This gives you a “second bite at the apple”12the opportunity for another large payout when the entire platform is sold again in the future. In this model, you typically retain clinical autonomy while the PE partner handles the business administration.
Selling to a Hospital System
When selling to a hospital, the deal often focuses more on your future employment. The upfront payment may be smaller, with a greater portion of the value delivered through a long-term, well-compensated employment contract. These agreements are complex and must be structured carefully to align with fair market value regulations while meeting your personal career goals.
Your legacy and staff deserve protection during the transition to new ownership.
Frequently Asked Questions
Why is the GI & Hepatology practice market in Louisville, KY considered a good opportunity for sellers right now?
The market in Louisville is very active with high demand from both strategic buyers such as hospital systems and financial buyers like private equity firms. Only about 10% of GI physicians are part of consolidated platforms, so there is significant interest in acquisitions and partnerships, especially for well-run practices.
What are the key valuation drivers for a GI & Hepatology practice when selling in Louisville?
Key valuation drivers include the ancillary services the practice provides such as ambulatory surgery centers (ASCs), in-house anesthesia, infusion therapy, and pathology labs. These services generate multiple streams of revenue and significantly enhance the practice’s profitability and attractiveness to buyers.
What valuation multiples can sellers expect for GI practices in Louisville?
Typical EBITDA multiples buyers pay are 10x-13x for stand-alone GI practices, 8x-9x for GI-focused surgery centers, and 5x-7x for smaller tuck-in practices. Proper financial presentation and reporting can help achieve valuations at the higher end of these ranges.
What are the main steps involved in selling a GI & Hepatology practice?
The process includes three key phases: preparation and strategy (optimizing financials and practice positioning), valuation and marketing (setting a price and confidentially marketing to buyers), and due diligence and closing (buyer review of records and finalizing legal agreements). Proper planning at each stage helps maximize outcome and minimize issues.
What should sellers consider about post-sale arrangements and partnerships?
Post-sale, sellers need to negotiate their future role, compensation, and financial arrangements. Selling to private equity often involves an upfront cash payment plus equity rollover for future gains while retaining clinical autonomy. Selling to hospitals may focus more on employment contracts with structured compensation, requiring detailed planning to protect legacy and staff.
