A Case Study in Selling a Dermatology Practice 

In a recent podcast produced by our healthcare-focused investment banking firm, we featured Dr. Alison Moon, a distinguished physician and former owner of First Coast Dermatology. With our firm having recently represented First Coast Dermatology in a successful sale of the practice, we discussed attributes of the sale process, including the key takeaways and outcomes. Additionally, Dr. Moon provided valuable takeaways for practice owners and potential sellers of a healthcare practice. Following is a lightly edited transcript of that conversation. 

What is the story of First Coast Dermatology and your ownership of it? 

I started First Coast Dermatology Associates right out of my residency a little more than 20 years ago. It began with just one dermatologist and has grown to include multiple clinical providers. All of us are female, and we all went through the same residency program, which means we’re very like-minded and share common goals, such as a strong commitment to work-life balance. Nobody works 5 full days a week; our schedules vary from the equivalent of 2 days to 4½ days a week. This flexibility helps prevent burnout and supports our well-being. 

We offer both medical and cosmetic dermatology services, and our location near the beach is an added bonus; the growth of the practice has been gradual but remarkable. Additionally, I did my residency at Mayo Clinic and was part of the first class of residents at their Florida site. Every doctor who has joined us over the years also completed their residency training at Mayo Clinic. Being just a few miles away from Mayo’s campus fosters a sense of home and encourages a collegial environment where we can collaborate and support each other with challenging cases. This has been crucial in maintaining the high standards of our practice and in fostering a supportive workplace. 

What ignited your potential interest in selling, and what factors convinced you that selling now made the most sense? 

When COVID-19 hit, it highlighted how vulnerable a private practice can be to unexpected financial events. This prompted me to seriously consider the long-term future of my practice, especially as I approached the age when retirement becomes a consideration. I knew it would not be wise to start exploring my options just 6 months before I wanted to retire. The impending retirement of my office manager, who had been with me for almost 20 years, alongside the youth of my other physicians, made me realize I needed to assess the long-term options available, one of which included selling the practice. 

About 2 years ago, I began holding monthly brainstorming sessions with my corporate attorney. As I delved deeper into the option of selling, I educated myself through various online resources to understand the process better. I quickly recognized that selling a practice was daunting and not something I wanted to face alone. It became clear that I needed expert guidance from an investment banking advisor with specific experience in the dermatology and aesthetics industry to ensure the process was handled correctly since selling a practice is irreversible. 

What would you tell colleagues about the sale process and your key takeaways? 

Once I decided to pursue selling the practice, I had to fully commit myself to the process. I became a believer in running a competitive process as it seemed the most logical way to get a quality outcome. I was aware it would be challenging and demanding, but I placed my trust in my advisors, including legal and financial, as they were all experienced in mergers and acquisitions. In addition, I had to rely on my office manager and accountant, especially with tight process timelines and the need to provide detailed practice information quickly. 

As a seller, it is important to understand each step and to support a process with set deadlines, as that helps keep the momentum up and ensure a closed deal. In addition, a seller should ensure that the practice’s financials and key operational information are prepared and presented in the best possible light and can withstand the scrutiny of buyer diligence. I did my utmost to comply with diligence requests because I knew that the faster we provided the necessary information, the smoother the process would be. 

What are your thoughts on the overall outcome and why you ended up selecting the buyer that you did after you reviewed multiple offers in the competitive process? 

The work that was done generated more than eight offers, and we compared the pros and cons of the various options. Initially, I was concerned about being unable to decide, possibly facing a tie among top contenders. However, as we progressed, it became increasingly clear which decision was the best for my practice. 

One significant factor for me was the ability to retain the practice’s name, as some offers allowed for brand continuity while others did not. Additionally, along with obtaining a strong valuation, I wanted to understand what buyers were proposing for transaction structure. For instance, was the transaction going to be an all-cash deal, or would it have earn-out included in the structure? Moreover, the opportunity to potentially reinvest some of the sale proceeds back into the buyer’s stock was weighed carefully, considering both positive and negative outcomes I’d learned about. 

The process was instrumental in identifying best valuation, optimal transaction structure, and the best fit. For the fit, it was important for me to have a strategic buyer that prioritized patients, was physician-run, was financially able to complete an acquisition of this size, and had reasonable expectations of me for after transaction close. The buyer also needed to have a great reputation and assure me that my clinical providers would be well-treated and their contracts honored. 

The transaction process was completed in less than 6 months, and we obtained a perfect strategic buyer match for my practice. The buyer we selected truly aligned with my practice’s values and goals. 

Having started, grown, and sold a practice, how would you recommend other practice owners improve the value of their practice and be best prepared for a sale? 

For practice owners considering selling one day, I would recommend starting consultations early with experienced advisors. This will help an owner to understand the practice’s strengths and weaknesses from a mergers and acquisitions market perspective. Some key items that can impact the attractiveness of your practice in a sale process include: 

1. Retaining multiple clinical providers should ensure the practice value isn’t tied to just one person. 
2. In terms of a financial profile, showing a trend of increasing adjusted EBITDA and revenue is crucial. In addition, you need to make sure that you have quality financial records that can withstand a buyer’s scrutiny. 
3. Build an internal team that you can trust and to whom you can delegate diligence and financial requests to. This includes a good office manager and accountant. 
4. Hire an experienced advisory team that can manage your sale process and obtain a better outcome for you. 

I am incredibly grateful for the support I received, resulting in an outcome that far exceeded my original expectations.