Why Aesthetic and Wellness Practices Are Prime Targets for Private Equity-Backed Groups

Why Private Equity-Backed Groups Are Investing in Aesthetic and Wellness Practices

In recent years, aesthetic and wellness practices have become highly attractive targets for private equity (PE) firms. These groups are continually seeking investment opportunities in healthcare due to the industry’s high growth potential and consistent demand. Specifically, aesthetic and wellness practices, including medspas, dermatology clinics, plastic surgery practices and other wellness-focused businesses, present unique opportunities for private equity groups to drive value through operational improvements, scalability and industry consolidation.

In this blog post, we’ll explore the reasons why private equity-backed groups are increasingly targeting aesthetic and wellness practices and how practice owners can benefit from partnering with or selling to these investors.

1. High Demand for Aesthetic and Wellness Services

Aesthetic and wellness services have seen a surge in popularity, driven by factors such as advancements in non-invasive procedures, a growing emphasis on self-care and evolving beauty standards. Patients are increasingly seeking treatments like Botox, dermal fillers, laser therapies, body contouring and anti-aging treatments, which are becoming more accessible and promoted across a wider demographic.

The aesthetics market, in particular, is experiencing robust growth. According to industry reports, the global aesthetics market is expected to reach over $24 billion by 2028. The wellness sector, which encompasses everything from holistic therapies to preventative healthcare, is also on a rapid upward trajectory, with increasing consumer interest in health, beauty and overall well-being.

This consistent demand for services makes aesthetic and wellness practices attractive to private equity firms, which are looking for stable industries with room for growth. Practices that offer popular services, such as medspas or dermatology clinics, are often prime targets for acquisition as they provide a reliable revenue stream with recurring patient visits.

2. Opportunities for Scalability and Consolidation

One of the primary strategies private equity groups employ is to invest in businesses that can be scaled effectively. Aesthetic and wellness practices often fit this mold due to their ability to replicate successful business models across multiple locations. Private equity firms recognize that by acquiring one or more practices, they can implement operational efficiencies, streamline marketing and open additional locations to drive growth.

Private equity firms often pursue strategies where they acquire several smaller practices and combine them into a larger, more efficient operation. This consolidation creates economies of scale, reduces overhead costs and improves operational efficiency. Practices in turn benefit greatly from access to resources like centralized billing, marketing, HR and management systems.

For example, a private equity firm may acquire a plastic surgery practice or dermatology clinic and then look for other complementary practices to fold into the larger network. By doing so, they create a regional or national network of practices that operate under one brand, increasing market share and profitability.

4. Profitability and High Margins

Aesthetic and wellness practices often operate with relatively high profit margins, making them attractive to private equity groups. Many of these businesses provide cash-based services, meaning they are less reliant on insurance reimbursements and don’t face the same complexities or delays in payment. Patients pay directly for treatments and procedures, which improves cash flow and profitability for the practice.

Additionally, the use of non-invasive technologies and high-demand services like skincare treatments, injectables and laser therapies tend to generate strong revenue with relatively low overhead costs. Practices that specialize in these areas often experience high patient retention rates, reinforcing its recurring revenue and profitability.

PE groups recognize the potential for growth and profitability in these high-margin businesses. By acquiring and consolidating practices, they can boost profit margins further through economies of scale, streamlined operations, and expanded service offerings.

5. Room for Operational Improvements

Private equity groups specialize in identifying businesses that have significant growth potential, particularly through operational improvements. Many independent aesthetic and wellness practices, while highly successful, may lack the resources or expertise to implement best practices in areas for management aspects like marketing, billing or patient acquisition.

PE-backed groups bring the expertise and capital needed to optimize the operations of these practices. This may involve:

• Upgrading technology systems: Private equity firms can invest in cutting-edge software for scheduling, patient management and billing to improve operational efficiency
• Expanding marketing efforts: With access to professional marketing teams, private equity firms can implement more robust digital and traditional marketing strategies to attract new patients while retaining existing ones
• Improving staffing and training: By standardizing training and hiring processes, private equity groups can ensure that each practice operates at peak performance with well-trained staff.
• Streamlining administrative functions: Centralizing back-office operations like HR, accounting and compliance reduces overhead costs and allows practice owners to focus on patient care.
• These operational improvements not only enhance the day-to-day functioning of the practice but also increase its profitability, making the business more valuable in the long term

6. Access to Capital for Growth

Many PE groups bring substantial financial resources to the table. This allows aesthetic and wellness practices to pursue growth strategies that may have been out of reach before. Access to capital enables practices to:

• Open new locations: Private equity groups often provide the funding necessary to expand into new geographic markets or open additional clinics in high-demand areas
• Invest in advanced technologies: Practices can leverage private equity funding to invest in the latest aesthetic devices, lasers or wellness technologies, offering cutting-edge services that attract new patients
• Recruit top talent: Private equity backing can help practices recruit and retain skilled medical professionals, such as board-certified dermatologists or plastic surgeons, ensuring the highest level of patient care
• Expand service offerings: Private equity groups may encourage practices to add new services that align with market trends, such as body contouring, wellness coaching or holistic therapies

For practice owners who want to grow their business but lack the financial resources to do so, partnering with a private equity-backed group offers the opportunity to achieve that growth with the support of experienced investors.

7. Attractive Exit Strategies for Practice Owners

For many practice owners, selling to a private equity-backed group provides an ideal exit strategy. Whether you’re planning to retire, reduce your workload or focus solely on clinical care, private equity offers a pathway to financial security while ensuring the practice continues to thrive.

Private equity firms typically offer competitive offers for practices, often higher than what an individual buyer might pay, due to their ability to generate returns through operational improvements. In addition to an upfront payout, many deals with private equity firms include:

• Equity roll opportunities: In some cases, practice owners can retain a minority stake in the business, allowing them to benefit from future growth and profitability
• Earn-out structures: An earn-out agreement allows practice owners to receive additional payments based on the practice’s post-sale performance, ensuring they continue to benefit from the business’s success.
• Continued involvement: Many private equity firms allow practice owners to stay on in a clinical or advisory capacity, maintaining their relationship with patients while offloading administrative responsibilities

This flexibility provides practice owners with a smooth transition and financial stability while ensuring that their business continues to grow under professional management.

Bottom Line

Aesthetic and wellness practices are prime targets for private equity-backed groups due to their strong demand, profitability, scalability and growth potential. Whether you’re considering selling a medspa, dermatology clinic, or plastic surgery practice, private equity offers practice owners a unique opportunity to achieve financial security while ensuring the future success of their business.

If you’re thinking about selling your practice, partnering with an experienced aesthetics practice broker or wellness practice broker can help you navigate the sale process and find the right private equity group to meet your goals. Contact us today to learn more about how we can assist you in exploring your options and securing the best possible outcome for your practice.