Definition
A Sell-Side Process is a structured, competitive auction run by M&A advisors who represent you, the practice owner. The goal is to confidentially market your practice to a curated group of qualified buyers at the same time. This creates competition to maximize your valuation and gives you leverage to negotiate better terms for your future.
Think of it like hiring a top real estate agent to sell your home. Instead of just putting a sign in the yard and taking the first offer, the agent stages the home, markets it widely, hosts an open house to attract multiple buyers, and encourages a bidding war to get you the highest price and best closing conditions. A sell-side process does the same for your medical practice.
Why This Matters to Healthcare Providers
Engaging in a sell-side process puts you in control of your practice’s sale. Instead of reacting to a single unsolicited offer from a local hospital or private equity group, you proactively create a market for your practice, which almost always results in a higher sale price and more favorable post-transaction agreements.
Example in Healthcare M&A
Scenario: A successful four-physician orthopedic group is approached by a regional hospital with a buyout offer. The partners feel the offer is fair but have no way to be sure it reflects their practice’s true market value.
Application: Instead of accepting the offer, the group hires an M&A advisor to run a formal sell-side process. The advisor prepares a confidential overview of the practice, highlighting its strong referral network, efficient operations, and potential for adding an Ambulatory Surgery Center (ASC). They then contact 25 potential buyers, including national orthopedic platforms, private equity firms, and other health systems.
Outcome: The process generates five formal offers, or Letters of Intent (LOIs). The competition drives the final valuation 30% higher than the hospital’s initial offer. The physicians also gain the leverage to negotiate a better employment agreement with less restrictive Non-Compete Covenants and a guaranteed bonus pool for their staff.
Related Terms
- Buy-Side Process – The opposite of a sell-side process, where advisors represent a buyer seeking to acquire practices.
- LOI (Letter of Intent) – The non-binding offer document that buyers submit during a sell-side process, outlining their proposed price and terms.
- Due Diligence – The investigation a winning bidder conducts after an LOI is signed, which a well-managed sell-side process prepares you for.
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Frequently Asked Questions
What is a Sell-Side Process in healthcare M&A?
A Sell-Side Process is a structured, competitive auction managed by M&A advisors representing the practice owner. It confidentially markets the practice to a curated group of qualified buyers simultaneously to create competition, maximize valuation, and provide leverage for negotiating better terms.
Why is a Sell-Side Process important for healthcare providers?
Engaging in a Sell-Side Process allows healthcare providers to proactively create a competitive market for their practice. This often results in a higher sale price and more favorable post-transaction agreements than reacting to unsolicited offers from buyers.
Can you provide an example of a Sell-Side Process in healthcare?
Yes. For instance, a four-physician orthopedic group received a buyout offer from a regional hospital but wanted to ensure true market value. They hired an M&A advisor who contacted 25 potential buyers, generating five formal offers. This competition increased the final valuation by 30% over the hospital’s initial bid and allowed for better employment terms.
What are some key terms related to a Sell-Side Process?
Key related terms include Buy-Side Process (where advisors represent buyers), Letter of Intent (LOI, the non-binding offer document submitted during the process), and Due Diligence (the investigation conducted by the winning bidder post-LOI).
How does a Sell-Side Process compare to selling a home with a real estate agent?
A Sell-Side Process is like hiring a top real estate agent who stages a home, markets it widely, hosts an open house to attract multiple buyers, and encourages a bidding war. Similarly, the process markets a medical practice to multiple buyers to maximize sale price and improve deal terms.