The market for Ortho & MSK practices in Tennessee is seeing unprecedented interest, driven largely by private equity investment. For practice owners, this creates a significant opportunity. But it also raises questions about timing, valuation, and the sale process itself. This guide provides a clear overview of the current landscape to help you understand your options and make informed decisions for your future, your staff, and your legacy.
Market Overview
The days of the siloed, independent practice are changing. A wave of consolidation, led by private equity (PE) firms and larger strategic health systems, is reshaping the Ortho & MSK space. These groups are looking to build regional and national platforms, and Tennessee has become a key area of focus.
A Shifting Landscape
Nationwide, healthcare is moving toward larger, more efficient practice models. For specialties like Ortho & MSK, this means independent physicians have more options than ever before. You can gain access to capital for growth, reduce administrative burdens, and secure a strong financial future by partnering with a larger organization. This trend is not just about selling out. It is about strategic alignment for future success.
Why Tennessee Is a Focal Point
Tennessee’s growing population and business-friendly climate make it an attractive market for investors. PE firms see the state as a strategic region to build out their orthopedic platforms. They are actively seeking well-run, profitable practices to serve as anchors for their expansion. This focused attention means that right now, Tennessee practice owners are in a uniquely strong negotiating position.
3 Key Considerations Before You Sell
Thinking about a sale involves more than just finding a buyer. The decisions you make before you even go to market can have the biggest impact on the outcome. Here are three critical areas to focus on from the start.
- Understand Your True Value. Your practice’s worth isn’t just a multiple of your revenue. Sophisticated buyers look at “Adjusted EBITDA” a measure of profitability that accounts for owner-specific expenses. Miscalculating this figure is the most common mistake we see. It can lead owners to leave significant money on the table.
- Navigate Tennessee’s Regulations. Tennessee, like many states, has rules regarding the “corporate practice of medicine.” These regulations can affect how a deal is structured and who can own a medical practice. Understanding these rules early on prevents legal headaches and deal-killing roadblocks down the line. It is a detail that requires expert guidance to navigate correctly.
- Define Your Post-Sale Goals. What do you want your role to be after the sale? How will your staff and clinical culture be protected? Answering these questions upfront helps find the right type of buyer. A partner who shares your vision is more valuable than one who simply offers the highest price.
Market Activity and Buyer Interest
While specific transaction details in Tennessee are often kept confidential, the overall trend is clear: M&A activity for Ortho & MSK practices is accelerating. This is not a passive market. It is an active one, with well-funded buyers searching for the right partners.
Private Equity Is Driving Demand
The majority of today’s buyers are private equity groups. They are not just buying a business. They are investing in a “platform” they can grow. They bring capital and operational expertise, aiming to build a larger, more valuable enterprise over a 5-7 year period. For a practice owner, this can mean a significant upfront payment plus the opportunity for a “second bite of the apple” through retained equity. This structure can substantially increase your total financial return.
What Sophisticated Buyers Want
These buyers are disciplined. They look for practices with a history of stable profitability and clear growth potential. Key attractive features include:
* Scale: Practices with over $1M in Adjusted EBITDA often attract higher valuation multiples (typically in the 5.5x 6.5x range or higher).
* Diversified Providers: A practice that doesn’t rely on a single owner-physician is seen as less risky and more scalable.
* Strong Systems: Clean financials and efficient operational processes show a well-managed business.
The Four Stages of a Successful Sale
Selling your practice is a structured process, not a single event. A well-managed sale protects your confidentiality, creates competitive tension among buyers, and maximizes your final value. At SovDoc, we run a professional process that moves through four distinct stages. Each stage is designed to position you for the best possible outcome while minimizing disruption to your practice.
| Stage | Key Objective | Where Expert Guidance Helps |
|---|---|---|
| 1. Preparation | Organize financials and frame your growth story. | We normalize EBITDA to reveal true profitability and craft the narrative that attracts premium buyers. |
| 2. Marketing | Confidentially find and engage ideal buyers. | We access our proprietary database of vetted investors and create a competitive auction dynamic. |
| 3. Due Diligence | Withstand intense buyer scrutiny. | We help you prepare for financial, legal, and operational reviews to prevent surprises that can derail a deal. |
| 4. Closing | Negotiate final terms and plan the transition. | We structure the deal to optimize your after-tax proceeds and align with your post-sale goals. |
How Your Ortho & MSK Practice is Valued
One of the first questions every owner asks is, “What is my practice worth?” The answer is more complex than a simple rule of thumb. Sophisticated buyers use a specific methodology to arrive at a valuation, and understanding it is key to negotiating effectively.
The Key Metric: Adjusted EBITDA
Buyers value your practice based on its sustainable cash flow. The best measure for this is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). We start with your net income and add back non-cash expenses and one-time or owner-specific costs. These can include things like a portion of your own salary if it’s above market rate, personal auto leases, or family members on payroll who are not active in the business. This process often reveals a much higher profitability than you see on a standard profit and loss statement.
The Multiplier Effect
Once Adjusted EBITDA is established, a valuation multiple is applied to it. This multiple is not fixed. It changes based on several risk and growth factors:
* Size and Scale: Larger practices with higher EBITDA command higher multiples.
* Provider Mix: A multi-provider team is more valuable than a solo practice.
* Growth Profile: A track record of consistent growth is highly attractive.
* Ancillary Services: In-house services like physical therapy or imaging add value.
Determining the right multiple requires real-time data from recent, comparable transactions insight a dedicated M&A advisor provides.
3 Questions to Ask About Life After the Sale
A successful transaction isn’t just about the price. It’s about building a future that aligns with your personal and financial goals. The structure of your deal is where you protect your legacy and define what comes next. Before you sell, consider these three critical questions.
- What will my role look like? Many owners continue to practice after a sale. The key is to negotiate your role, compensation, and level of clinical autonomy during the deal process. The right partner will want to keep you involved and leading the clinical side of the practice. Control is not all or nothing. It is something you design.
- How will my team be treated? Your staff is one of your practice’s most valuable assets. Buyers know this. A good partner will be focused on retaining your key team members. We help you negotiate for employment agreements, retention bonuses, and a cultural integration plan that protects the people who helped you build your success.
- How can I maximize my total outcome? The cash you receive at closing is only one part of the equation. Many deals include an “equity rollover,” where you retain a stake in the new, larger company. This gives you a potential “second bite of the apple” when that company is sold again in the future. Structuring the sale correctly from a tax perspective can also significantly increase what you ultimately take home.
Frequently Asked Questions
What is driving the increased interest in Ortho & MSK practices in Tennessee?
The increased interest is primarily driven by private equity investment and a wave of consolidation in the healthcare sector. Tennessee’s growing population and business-friendly climate make it a strategic region for investors looking to build orthopedic platforms.
How is the value of an Ortho & MSK practice in Tennessee determined?
The value is primarily based on Adjusted EBITDA, which adjusts net income by adding back non-cash expenses and owner-specific costs. A valuation multiple, influenced by factors such as practice size, provider mix, growth profile, and ancillary services, is then applied to the Adjusted EBITDA to determine the practice’s worth.
What are the key stages in selling an Ortho & MSK practice?
The sale process has four key stages: 1) Preparation – organizing financials and framing growth; 2) Marketing – confidentially engaging ideal buyers; 3) Due Diligence – preparing for thorough reviews; 4) Closing – negotiating terms and planning transition.
What should practice owners consider about their role post-sale?
Owners should define their desired role post-sale, including their level of clinical autonomy, involvement, and compensation. Negotiating these details ensures the right partnership that values their leadership and clinical expertise.
What legal considerations should be addressed when selling a practice in Tennessee?
Owners must navigate Tennessee’s regulations regarding the corporate practice of medicine, which affect deal structure and ownership eligibility. Understanding these regulations early with expert guidance helps avoid legal issues that could derail the sale.