The Plastic Surgery & Medical Spa Markets: A Rising Tide of Mergers & Acquisitions and Capital Placement Activity

The past decade has witnessed enormous consolidation and capital markets activity within numerous segments of the health care market, including dermatology, urology, podiatry, and orthopedics. This momentum is now carrying forward into the aesthetics market, which includes the plastic surgery and medical spa sectors. Strategic buyers and financial sponsors, also known as private equity groups and family offices, have begun to aggressively pursue practices in these markets, as they are recognizing the enormous growth potential for these segments.

Reasons these strategic buyer and investment groups are now focusing on the plastic surgery and medical spa markets include:

• Fragmentation of these segments, which present consolidation opportunities for sophisticated buyers and investors.
• The recurring-like nature of cosmetic procedures and offerings.
• Ability of plastic surgery and medical spa practices to leverage well-funded capital groups to help accelerate growth.
• Gaining interest from plastic surgery and medical spa owners in obtaining partial or full liquidity from their business. In addition, many owners are intrigued by the opportunity to get a “second bite of the apple” when a future liquidity event occurs in conjunction with a partner.

To further the point, the past 5 years have seen a total of $3.1 billion in capital placed across 400 aesthetics clinics and care center transactions.¹ Recent transactions include:

• Sono Bello’s June 2022 acquisition of Body Sculpt International, the nation’s third largest provider of body contouring surgery.
• Hidden Harbor Capital Partners’ 2021 acquisition of Inspire Aesthetics and Garramone Plastic Surgery, two plastic surgery and aesthetic centers based in Florida.
• The 2021 acquisition of Omni Cosmetic, a leading plastic surgery and cosmetic services practice for the Twin Cities, MN area, by Pinnacle Dermatology, a nationally focused dermatology and aesthetics platform owned by Chicago Pacific Founders.

To better understand the M&A and capital placement trends that are occurring in the aesthetics markets, we obtained insights from several industry participants and experts.

Consider Compliance Risks

“Before COVID, the ByrdAdatto law firm witnessed a steady drip of Mergers and Acquisitions (M&A) for aesthetic and cosmetic practices. Most of these acquisitions were outside parties buying a single location medspa or a plastic surgeon buying another plastic surgeon’s practice. Since the second half of 2021, the cosmetic M&A market has significantly shifted. Private equity is now actively looking for acquisition opportunities for both medspas and plastic surgery practices. Health care compliance is routinely recognized as the top risk in these acquisitions. Potential sellers should make sure their house is in order from a compliance perspective before going to market. Buyers, particularly those new to the aesthetic market, should educate themselves on the health care compliance risks for aesthetic practices. The two most common problems with an aesthetic practice are 1.) improper corporate structure; and 2.) improper staffing. Both of these can significantly impact the viability of an acquisition.”

— Michael Byrd and Brad Adatto

• ByrdAdatto is a national business and health care firm serving clients in many industries, with a heavy focus on the health care industry. The firm’s attorneys have become a national voice, routinely lecturing throughout the country at medical, dental, and legal conferences.
• byrdadatto.com

Compelling Investment Opportunities

“Dermatology and aesthetic practices utilize multiple product lines and revenue sources. This is different than other medical specialties and makes dermatology and aesthetic practices a unique investment opportunity that is markedly different from other community-based specialties.

“Many practices continue to innovate to increase their top-line opportunities, while restructuring to control their bottom-line expenses. For example, in the past year, many dermatology and aesthetic practices have pursued service-line expansion into repeatable, year-over-year offerings such as annuity focused cosmetics, cosmeceuticals, skincare lines, and other elective procedures. In addition, practices are also developing vertical integrations of dermatopathology, service-line lab offerings, and other more sophisticated service expansions. These factors, coupled with shifting health care market conditions, create compelling investment opportunities for financial sponsors and other investors long-term.”

— Dana Jacoby

• Dana Jacoby is President of Vector Medical, a leading strategy firm bringing together independent medical practices and financial partners across numerous specialties in the United States. Vector Medical has been instrumental in architecting the future of health care business, transaction, and management services for the past 25 years.
• vectormedicalgroup.com/

Valuations are Increasing

“As an investment bank that specializes in representing practice owners in business sales, Bundy Group keeps a close pulse on which health care segments are generating surging interest from the M&A and capital markets. The plastic surgery and medical spa markets used to be considered a relative afterthought within the M&A community, but those segments have evolved and are now coveted by a critical mass of strategic buyers and financial sponsors. The increasing valuation multiples are reflecting this growing investment demand. Practice owners are taking note of this activity, and the positive impact on their business valuations, and are beginning to ask Bundy Group how they can best take advantage of this market momentum.”

— Stewart Carlin

• Managing Director with Bundy Group, a boutique investment bank that specializes in representing dermatology & aesthetic practice owners in business sales, capital raises and acquisitions.
• www.bundygroup.com

Meeting Demand

“It’s an extremely exciting time for multi-clinic group expansion. The biggest driver of growth in the aesthetic dermatology space is—no different than any other successful business—unmet need in the marketplace. Each year, more and more patients seek out minimally invasive aesthetic treatments, and the ethical aesthetic dermatology groups who have seasoned financial partners, like LaserAway, are best poised to provide these patients with the safe and effective treatments they desire. It’s my strong contention that continued growth in the aesthetic sector will stem primarily from expanding organizations like ours.”

— Will Kirby, DO

• Will Kirby, DO is a dermatologist, professor, spokesman, researcher and author and is recognized as an expert in the dermatology and aesthetics industry. He also serves as Chief Medical Officer for LaserAway, a leading provider of aesthetic dermatology that that is backed by Ares Management Corporation.

1. Leclerc, Oliver. From extreme to mainstream: The future of aesthetics injectables. McKinsey & Company. December 2021.