Mergers and Acquisitions (M&A) are the processes through which businesses and practices are bought, sold, and combined. While often used together, they describe two different outcomes.
- An acquisition is when a larger entity purchases your practice. You become part of that buyer’s organization.
- A merger is when your practice combines with another practice of similar size to form an entirely new, larger entity.
In both cases, the goal is to achieve strategic advantages that would be difficult to obtain alone, such as gaining access to better technology, achieving cost savings, or expanding patient reach.
Why This Matters to Healthcare Providers
For you as a practice owner, M&A is the formal path to selling your business, retiring, or partnering for growth. Understanding the M&A process is the first step toward controlling your future, whether that means maximizing your practice’s value for a sale or finding the right partner to help you compete in a consolidating market.
Example in Healthcare M&A
Scenario: A private equity firm wants to build a leading orthopedic group in the state. The firm identifies a successful 15-physician practice with a strong local reputation.
Application: The firm makes an offer to acquire the practice. The deal is structured to give the physicians a significant upfront cash payment, plus equity in the new, larger company being formed. The practice becomes the “platform” for future acquisitions.
Outcome: The acquisition provides the physician-owners with financial liquidity and relieves them of administrative burdens. They continue to practice with new resources for marketing and technology, while the private equity firm uses their practice as a base to acquire smaller “bolt-on” orthopedic groups in the region, pursuing a Roll-Up Strategy.
Related Terms
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About the SovDoc M&A Glossary
Hand-curated by our deal-makers and analysts, the SovDoc glossary turns complex mergers-and-acquisitions jargon into clear, plain-English definitions.
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Frequently Asked Questions
What is the difference between a merger and an acquisition in M&A?
An acquisition occurs when a larger entity purchases a practice and integrates it into their organization. A merger happens when two similarly sized practices combine to form a new, larger entity.
Why are mergers and acquisitions important for healthcare providers?
M&A provides practice owners with a formal way to sell their business, retire, or partner for growth. It helps them control their future, maximize practice value, and find partners to compete in a consolidating market.
What strategic advantages can M&A achieve in healthcare?
M&A can provide access to better technology, achieve cost savings, and expand patient reach, which are benefits difficult to obtain individually.
What typically happens in an acquisition scenario involving a private equity firm and a healthcare practice?
The private equity firm makes an acquisition offer that includes upfront cash and equity for the physicians. The practice becomes a platform for future acquisitions, providing financial liquidity and administrative relief to physician-owners.
What is a Roll-Up Strategy in healthcare M&A?
A Roll-Up Strategy involves acquiring smaller practices and combining them under a larger platform practice to expand market presence and resource access.