Selling your dermatology practice in Baltimore is a significant decision, especially in the current market. Private equity firms and larger health systems are showing unprecedented interest in the region, creating unique opportunities for owners like you. This guide provides a clear overview of market trends, valuation drivers, and the sale process, helping you navigate the path forward. Protecting your confidentiality while exploring these options is critical.
Market Overview
The market for dermatology practices in Baltimore is one of the most active in the country. This is not a matter of opinion. It is a reality driven by clear financial trends that create significant opportunities for practice owners who are prepared.
High Private Equity Interest
Maryland has become a focus for private equity investment in healthcare. In 2021, over 36% of the state’s dermatology practices were already backed by PE firms. This is more than double the average for all physician practices. For you, this means there is a pool of well-funded, motivated buyers actively looking for practices to acquire in the Baltimore area.
A Consolidation Hotspot
This investment has fueled a wave of consolidation. We have seen local groups like Anne Arundel Dermatology grow from a handful of locations to a regional powerhouse through acquisition before being sold to another, larger investor. This trend shows a clear path for independent practices to gain a premium valuation by joining a larger platform. The key is understanding how to position your practice to attract these strategic buyers.
Key Considerations for Sellers
Selling your practice involves more than just a financial transaction. It is about your legacy, your staff, and your patients. As you consider a sale, thinking through a few key areas early on will put you in a much stronger negotiating position.
Here are three things every Baltimore dermatology owner should consider:
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Your Personal and Professional Goals. Are you looking for a complete exit for retirement? Or do you want to stay on and focus solely on clinical work without the administrative headaches? Your answer shapes the entire deal structure, from an all-cash sale to a partnership where you retain equity.
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The Buyer’s Identity and Culture. The highest offer is not always the best one. You need to ask what a potential partner’s plans are. Will they keep your practice name? How will they treat your dedicated staff? Finding a buyer whose vision aligns with yours is critical for a smooth transition and protecting what you have built.
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Your Practice’s Readiness. Buyers will scrutinize every aspect of your operations and financials. Having clean, well-organized financial records and operational data is not just helpful. It is mandatory. Practices that are prepared for this diligence process from day one achieve higher valuations and face fewer delays.
Market Activity
The strong interest in dermatology is not random. It is fueled by specific, predictable economic forces that have created a sustained seller’s market. For practice owners in Baltimore, this means the current window of opportunity is supported by long-term trends.
Consistent Buyer Demand
The number of dermatology practices acquired by investors has grown steadily for over a decade. With roughly 80% of all physicians now employed by corporate entities, the path from independent practice to a larger organization is well-established. This is no longer a niche trend. It is the primary model for practice transitions today, ensuring a deep and stable pool of potential buyers for your practice.
The Private Equity Effect
Private equity firms operate on a cycle. They typically buy a “platform” practice, add smaller “tuck-in” acquisitions for 3-7 years, and then sell the larger, more valuable group to the next buyer. This means there is constant pressure on these firms to find high-quality practices like yours to fuel their growth. An advisor who understands this cycle can position your practice to attract the right buyer at the right time, maximizing your leverage.
The Sale Process at a Glance
A successful practice sale does not happen by accident. It is the result of a confidential, competitive, and professionally managed process designed to protect your interests and maximize value. While every deal is unique, the journey typically follows a clear path.
We find that breaking the process down into phases helps owners understand what to expect.
| Phase | Key Objective | Where a Guide Is Helpful |
|---|---|---|
| 1. Preparation | Determine practice value and prepare for market. | Normalizing financials (EBITDA) to show true profitability. |
| 2. Marketing | Confidentially contact a curated list of buyers. | Accessing a proprietary database of qualified PE and strategic buyers. |
| 3. Negotiation | Create competitive tension to secure the best offers. | Managing multiple bidders and complex deal terms (cash, equity, etc.). |
| 4. Diligence & Closing | Validate all financial and operational data for the buyer. | Preventing surprises and keeping the deal on track to close smoothly. |
The due diligence phase is where many unguided sales fall apart. Proper preparation is the best way to ensure a successful outcome.
Understanding Your Practice’s Value
One of the first questions every practice owner asks is, “What is my practice worth?” While many people talk about valuing a practice based on a multiple of revenue, sophisticated buyers look at your business differently. They value it based on its profitability.
It Starts with Adjusted EBITDA
The most important metric in any practice sale is Adjusted EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. More importantly, the “adjusted” part means we normalize your earnings for any owner-specific or one-time expenses, like a vehicle lease or an above-market salary. This process reveals your practice’s true underlying profitability, which is what a buyer is actually purchasing. Many owners are surprised to learn their Adjusted EBITDA is significantly higher than their net income.
The Power of the Multiple
Your Adjusted EBITDA is then multiplied by a number, the “multiple,” to determine your practice’s total value. This multiple is not a fixed number. It increases based on factors that reduce a buyer’s risk. These include having multiple clinical providers, a strong growth history, and clean financial records. A practice with $1M in Adjusted EBITDA will command a much higher multiple than one with $300K, making scale a key driver of value. A comprehensive valuation is the foundation of a successful transition.
Life After the Sale
The day your practice sale closes is not an ending. It is the beginning of your next chapter. Planning for what comes next is just as important as negotiating the deal itself. The right agreement protects your financial future and your professional legacy.
Here are three key areas to consider for your post-sale plan:
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Defining Your New Role. Your involvement doesn’t have to end at closing. Many deals are structured for a physician to continue practicing for several years, free from management duties. Another popular option is “rolling over” a portion of your sale proceeds into equity in the new, larger company. This allows you to benefit from the future growth you help create.
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Structuring for Clinical Autonomy. A common fear is that new ownership will interfere with clinical decisions. However, the right partner will want to preserve your practice’s clinical excellence. We help structure agreements that protect your clinical independence, ensuring that patient care remains the top priority.
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Ensuring a Smooth Transition for Your Staff. You have likely spent years building a talented and loyal team. A successful transition plan includes securing their future. This means negotiating for employment agreements and ensuring the new owner’s culture is one where your team can continue to thrive.
Your legacy and staff deserve protection during the transition to new ownership.
Frequently Asked Questions
What makes Baltimore an attractive market for selling a dermatology practice?
Baltimore is one of the most active markets for dermatology practice sales due to high private equity interest and ongoing consolidation. Over 36% of Maryland’s dermatology practices are backed by PE firms, creating a pool of well-funded buyers actively looking for acquisitions in the area.
How is the value of a dermatology practice in Baltimore determined?
The value is primarily based on Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which normalizes earnings for owner-specific or one-time expenses. This reflects the practice’s true profitability. The Adjusted EBITDA is then multiplied by a multiple that grows with factors like multiple clinical providers, growth history, and clean financial records.
What are key considerations for a dermatology practice owner looking to sell?
Owners should consider their personal and professional goals, the buyer’s identity and culture, and the readiness of their practice. Choosing a buyer aligned with your vision, preparing clean financial records, and deciding on your post-sale role are critical for a smooth transaction.
What does the sale process typically involve for a Baltimore dermatology practice?
The sale process includes four phases: Preparation (valuing and preparing the practice), Marketing (contacting potential buyers confidentially), Negotiation (creating competitive tension for the best offers), and Diligence & Closing (validating data and keeping the deal on track). Proper preparation and guidance during due diligence are essential to avoid deal collapse.
What should a seller plan for after selling their dermatology practice?
Post-sale planning includes defining your new role (clinical work, equity retention), structuring agreements to protect clinical autonomy, and ensuring a smooth transition for your staff with employment agreements and a compatible company culture. This protects your legacy, staff, and financial future.