Selling your Ortho & MSK practice in Minnesota is a significant decision. The market is active, with unique influences from large regional systems and growing private equity interest. This guide provides a clear overview of the current landscape, key steps for preparing your practice, and how to understand its true value. Proper navigation is key to maximizing your return and protecting your legacy. We will walk you through what to expect.
The Minnesota Market: Opportunity and Competition
The market for Ortho & MSK practices in Minnesota is robust and competitive. The entire U.S. orthopedics market is growing, projected to expand from $57.3 billion to over $74 billion by 2028. This growth attracts buyers. In Minnesota, the landscape includes major health systems like Mayo Clinic and M Health Fairview, alongside large, expanding private groups like Twin Cities Orthopedics.
These groups are actively looking to grow their footprint. At the same time, private equity continues to drive consolidation across the Midwest, creating large, multi-state alliances. For an independent practice owner, this means you have more types of potential buyers than ever before. It also means the competition to acquire well-run practices is high, creating a favorable environment for sellers who are properly prepared for a transaction.
What Buyers Look For: 3 Areas to Review Now
Before you even think about putting your practice on the market, focusing on a few key areas can dramatically impact your final outcome. Sophisticated buyers, whether they are large health systems or private equity groups, look past the surface. They want to see a well-run, professionalized business.
Here are three things to consider today:
- Your Financial Story. Buyers require clean, clear financial statements. This goes beyond tax returns. They want to see normalized profitability, or “Adjusted EBITDA”, which shows the true cash flow of the business without owner-specific expenses. We find that many practices are leaving value on the table simply because their books are not prepared for buyer scrutiny.
- Your Intangible Assets. What makes your practice special? It is often your reputation in the community, your referral network, and your loyal patient base. These elements make up your “goodwill” and are a real part of your practice’s value. Proving this value requires more than just saying it exists. It requires a story backed by data.
- Your Professional Team. Selling a practice is not a solo endeavor. You will need an accountant and a lawyer. However, to manage the entire process, coordinate the parties, and create a competitive environment that drives up the price, you need an M&A advisor who specializes in medical practices. This is the person who orchestrates the entire sale.
Consolidation and Private Equity: The New Buyers
The trend of smaller practices joining larger groups is accelerating. Nationally, there were around 400 physician practice sales in 2021 alone, and orthopedics has been a major focus since 2018. We see this in the Midwest with the formation of large supergroups. These groups increase their negotiating power with insurance companies and can afford better technology and support staff.
A major driver of this activity is private equity. These investment firms see the value in well-run MSK practices. They are not just buying a practice; they are often looking for a “platform” to invest in and grow. This often means the practice owner can sell a majority of the practice for cash now, but also retain a piece of ownership. This creates an opportunity for a second, often larger, payday when the entire platform is sold again in 5-7 years.
The Path to a Successful Sale
A successful practice sale does not happen by accident. It follows a structured, confidential process designed to protect your interests and maximize value. While every deal is unique, the journey typically involves several distinct stages. Running a formal process ensures you are negotiating from a position of strength, often with multiple interested parties at the same time.
Here is a simplified look at the key stages:
| Stage | Key Focus |
|---|---|
| 1. Preparation | Gathering financial data, performing a professional valuation, and creating marketing documents that tell your practice’s story. |
| 2. Marketing | Confidentially approaching a curated list of qualified strategic buyers and private equity groups who are the best fit for your practice. |
| 3. Negotiation | Analyzing initial offers (Letters of Intent), creating competitive tension between buyers, and selecting the best partner. |
| 4. Due Diligence | The buyer conducts a deep dive into your financials, operations, and legal standing. This is often the most intensive phase. |
| 5. Closing | Finalizing legal documents, communicating the transition to staff and patients, and officially transferring ownership. |
Due diligence is where many deals slow down or fall apart. Being prepared ahead of time is the best way to ensure a smooth closing.
What Is Your Practice Really Worth?
The most common question we hear is, “What is my practice worth?” The old rules of thumb, like a percentage of revenue, no longer apply. Sophisticated buyers value your practice based on its profitability, specifically its Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This is a measure of your practice’s true, ongoing cash flow. We calculate it by taking your reported profit and adding back owner-specific perks or an above-market salary. This number is almost always higher than what you see on your tax return.
Once we establish your Adjusted EBITDA, we apply a valuation multiple. This multiple (e.g., 5x, 7x, 9x) depends on factors like your specialty, size, reliance on a single provider, and growth potential. A multi-provider practice with a strong growth story will get a much higher multiple than a solo practice nearing retirement. The key is to not only calculate these numbers but to build a compelling story around them that a buyer can believe in.
Life After the Sale: Planning for a Smooth Transition
The work is not over once the deal is signed. A successful transition ensures your legacy is protected, your team is supported, and you are prepared for your next chapter. Planning for this phase is just as important as planning for the sale itself.
Caring for Your Team and Patients
Your staff and patients are the foundation of the practice you built. A smooth transition is a top priority. This involves clear, timely communication to reassure your team about their future with the new owner. For patients, you have a legal and ethical obligation to ensure continuity of care. This means giving them proper notice and clear instructions on how their medical records will be managed, which is a process governed by the state medical board.
Planning Your Next Chapter
What you do after the sale depends entirely on the deal you structure. Will you retire immediately? Or will you stay on for a few years, which is common in private equity deals? Many transactions now involve “rollover equity,” where you retain a portion of ownership. This requires a new mindset, shifting from owner-operator to a strategic partner. Understanding the tax implications and managing your wealth post-sale are critical steps that require advance planning with your advisory team.
Selling your Ortho & MSK practice in Minnesota? Get our guide on market trends, valuation, and the sale process to help you navigate the transaction with confidence.
Frequently Asked Questions
What is the current market environment for selling an Ortho & MSK practice in Minnesota?
The Minnesota market for Ortho & MSK practices is robust and competitive, influenced by major health systems like Mayo Clinic and M Health Fairview, as well as large private groups such as Twin Cities Orthopedics. Additionally, private equity is actively consolidating practices in the region, creating a favorable environment for sellers who are well-prepared.
What key areas should I focus on to maximize my practice’s value before selling?
Buyers look closely at three main areas: 1) Your Financial Story, including clean, clear financial statements and normalized profitability or Adjusted EBITDA; 2) Your Intangible Assets like your reputation, referral network, and loyal patient base backed by data; and 3) Your Professional Team, which includes having an accountant, lawyer, and especially an M&A advisor to manage and orchestrate the sale process.
How do private equity groups influence the sale of Ortho & MSK practices in Minnesota?
Private equity firms are key players driving consolidation in the region. They seek well-run practices to serve as platforms for larger multi-state alliances. Deals may involve selling a majority stake for immediate cash while retaining some ownership for potential future earnings when the platform is sold again in 5-7 years.
What is the typical process and timeline for selling an Ortho & MSK practice?
The sale process typically includes five stages: 1) Preparation with valuation and marketing materials; 2) Marketing to identified strategic buyers and private equity groups; 3) Negotiation of offers and selecting buyers; 4) Due Diligence involving deep financial and legal review; and 5) Closing with final legal documentation and ownership transfer. Running a formal process helps maximize value and protect your interests.
What should I plan for after the sale of my Ortho & MSK practice?
Post-sale planning is crucial. You should ensure a smooth transition by communicating with staff and patients, maintaining continuity of care, and deciding your next chapter whether retirement or continuing in a strategic role. Understanding tax implications and wealth management are also important aspects to plan in advance with your advisory team.
