The past decade has seen a significant increase in capital markets activity and consolidation within various healthcare sectors, such as urology, orthopedics, podiatry, and dermatology. This momentum is now carrying over into the aesthetics market. As the number of private equity and financial sponsors looking to expand their operations in aesthetics increases, they are more likely to target practices in these areas. The increasing number of investment groups and private equity firms focusing on the medical spa and plastic surgery markets has also increased M&A activity. One of the reasons strategic buyers and investment groups are focusing on this market is the fragmentation of these segments that present consolidation opportunities for sophisticated buyers and investors. Plastic surgery and medical spa practices can leverage well-funded capital groups to help accelerate growth. Many medical spa and plastic surgery owners are also interested in obtaining a partial or full liquidity position from their businesses. They are additionally eager to get a "second bite" of the apple once a deal is made in conjunction with a partner. Over the past five years, the number of capital placements in the aesthetics space has increased significantly. Over the past couple of years, a total of $3.1 billion has been placed in various transactions across 400 aesthetic clinics and care centers. In June 2022, Sono Bello, a leading medical spa and plastic surgery company, acquired Body Sculpt International, a leading provider of body contouring procedures. In 2021, Hidden Harbor Capital Partners acquired two prominent plastic surgery centers in Florida. These facilities, known as Inspire Aesthetics and Garramone Plastic Surgery, were respectively located in Orlando and Fort Lauderdale. In 2021, Chicago Pacific Founders' subsidiary, Chicago Pacific Dermatologics, acquired Omni Cosmetic, a leading cosmetic and plastic surgery practice in the Twin Cities, Minnesota. This acquisition was carried out through its subsidiary, Pinnacle Dermatology. Consider Compliance Risks Prior to COVID, the ByrdAdatto law firm had witnessed a steady increase in the number of mergers and acquisitions (M&As) in the aesthetics space. Most of these were outside parties acquiring a single practice or a plastic surgeon acquiring another. The M&A market for cosmetics has significantly changed since the second half of 2021. As private equity firms continue to look for acquisition opportunities in the plastic surgery and medspas sectors, they are also more likely to consider healthcare compliance as the top risk when acquiring these businesses. Before going to market, potential sellers should ensure that their house is in order. Those who are new to the aesthetics industry should also be aware of the various healthcare compliance risks associated with operating a practice. The most common issues an aesthetic practice encounters are the lack of proper corporate structure and improper staffing. Compelling Investment Opportunities The multiple revenue sources that the aesthetic and dermatology practices use to make them an attractive investment opportunity. This is unlike other medical specialties, as they utilize multiple product lines and have different revenue sources. As the number of mergers and acquisitions in the aesthetics space continues to increase, many practices are also restructuring
to improve their bottom-line performance. For instance, many are focused on increasing their service-line opportunities while reducing their expenses. These changes are expected to create long-term investment opportunities for both investors and financial sponsors. The increasing number of mergers and acquisitions in the aesthetics space is also expected to drive the development of new service-line offerings and vertical integrations. Valuations are Increasing As an investment bank that focuses on representing the owners of healthcare businesses, the Bundy Group closely monitors the M&A activity in the industry. The medical spa and plastic surgery sectors have become more prominent targets for financial sponsors and strategic buyers. Before, these segments were considered relatively insignificant in the M&A community. The increasing number of transactions in the aesthetics space is also contributing to the growth of the multiple valuation multiples that investment banks are offering. As a result, many practice owners are starting to ask the Bundy Group for advice on how they can take advantage of the current market conditions. Meeting Demand The increasing number of transactions in the aesthetics space is also contributing to the growth of the multiple valuation multiples that investment banks are offering. One of the biggest factors driving the industry's growth is the increasing number of patients seeking out the services of ethical dermatology groups. These organizations, such as those that have experienced financial partners like LaserAway, are well-positioned to provide the best possible service to these patients.