A checklist for what matters most to potential buyers of your therapy practice

The physical therapy and rehabilitation care industry market is large and growing. Merger and acquisition activity continues to be on the radar for many of our nation's largest rehab therapy providers with six of the ten largest players now owned by private equity firms. There are several reasons for this industry phenomenon, which has driven multiples to a 20-year high and has attracted both financial and strategic buyers from all walks of life:

  • $28 billion market and growing
  • Projected five-year growth rate of 6.8%
  • Recession resistant—the sector grew during the recent recession
  • Aging population amid a highly fragmented landscape of providers
  • Investors with access to capital who are ready to invest

Whether it’s these attractive market dynamics, you’re simply looking to make a career change, or you “want out” of the business, the timing couldn’t be better for you to consider your options. There has been significant merger and acquisition activity by both strategic and financial acquirers as well as attractive valuation multiples with creative terms that could offer both short-term and long-term returns for therapy providers looking to sell.

There are many variables as to why your therapy business may or may not derive a certain level of interest or warrant a certain asking price, but the general rule still exists that “beauty is in the eye of the beholder.”  Here are the key metrics and factors that may drive  interest:

  • Location (neighborhood, city, and state)
  • Your location and visibility vs. the competition’s
  • Business financials
    • Revenue
    • EBITDA ( earnings before interest, taxes, depreciation, and amortization)
    • Add backs (expense items eliminated after sale)
    • Payer mix
  • Operating metrics
    • Visits per referral
    • Units per referral
    • Visits per therapist per day
    • Cancellation rates
  • Size
    • Number of locations (more sites means greater multiple)
  • Team
    • Staff size
    • Non-competes in place
    • Services offered
    • Leadership strength
  • Owner (you)
    • Alignment with buyers
    • Ability to assist with integration and growth plans
    • Established relationships with referral sources

An interested buyer’s team—which may consist of accountants, lawyers, therapists, and brokers—then considers the above factors over a period of time. This process is typically deemed the "due diligence" period and should be protected under a proper non-disclosure agreement from an attorney.  The end result will be a “valuation” of your business derived from the metrics listed above. Traditional transactions use the “multiple approach,” which basically takes your EBITDA and multiplies by a specific number which can range from two to 12 depending on how well your metrics stack up to the buyer’s requirements. We are seeing one to five clinics drive one to three multiple of EBITDA while larger groups of 20 or more exceed ten times EBITDA. These are general observations and may vary for a variety of reasons.

As with any transaction of this size, I highly recommend you don’t "go it alone" as you have too much to lose. For guidance, consult with your accountant or an experienced broker who has represented clients in the rehab therapy space. Keep in mind that larger organizations or private equity firms that are on the buying path review and analyze these deals on a regular basis and are well experienced in these areas, so you must be well represented and prepared to present your business in the best possible light to warrant the best valuation.

A good first step is to understand your personal and professional goals and see how a transaction would align with those major life decisions. Once you have completed that step, seek out a broker or expert who can direct you through this process, which typically includes a valuation analysis. Now you are armed to meet with potential buyers to compare and contrast price/offer, terms, and the integration process.  Be prepared for tire kickers, low offers, and an emotional roller coaster as this process can be lengthy. In the end, though, it can be not only worthwhile to you, but to your patients, employees, and investors.   


The president and CEO of Flexeon Rehabilitation, Joe LaPorta has lent his business leadership skills to several companies and organizations in the healthcare space, including Gambro Renal Care, McKesson Corporation, GE Healthcare, and Vidar Health Systems. Along with a broad skill set, keen business acumen, and a long-established network of industry relationships within the healthcare space, Joe brings a solid understanding of how to develop and manage strong revenue growth through team-building, innovation, and hands-on execution. His expertise encompasses both healthcare products and services in the areas of acute care, physical therapy, primary care, extended care, surgery centers, imaging centers, and laboratories.

Want to learn more about the metrics necessary to complete a successful exit? Join us for Ascend on September 20 in Dallas, where Joe will be presenting on this topic.

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