Understanding Your Buyer: How Search Funds, Family Offices, and Private Equity Differ When Acquiring Medical Practices
When it comes to selling your medical practice, the type of buyer at the table can significantly influence your experience—both financially and personally. While most physicians know to consider factors like price, transition timing, and continuity of care, few fully understand how the capital stack and investment strategy of a buyer can shape the outcome.
In this article, we’ll break down three common types of buyers in the healthcare M&A landscape—Search Funds, Family Offices, and Private Equity Firms—so you can make informed decisions about who’s the best fit to carry on your legacy.
What Is a Capital Stack—and Why Should You Care?
A capital stack describes how a transaction is financed—how much is paid with debt, equity, or other instruments like seller notes. Understanding this structure helps sellers evaluate:
- The risk of the deal falling through
- The likelihood of a successful close
- How much skin in the game the buyer has
- What role the seller may need to play post-close
Let’s explore how these stacks differ across buyer types.
Search Fund Buyers
Often early-career entrepreneurs backed by investors, search fund buyers are typically looking to acquire and personally operate a business—including medical practices.
- Characteristics:
- Capital Stack: 40–60% senior debt (often SBA), 20–40% equity from investors, 10–25% seller note
- Leverage: Conservative (1.5x–3.5x EBITDA)
- Seller Role: Frequently includes a seller note and transition support
- Exit Horizon: 5–7 years
- Best Fit: Legacy-minded doctors who want a capable, hands-on successor
Key Insight: Search funds are typically low on upfront cash but high on alignment—they often value mentorship and continuity and offer a personal touch.
Family Office Buyers
Family offices are private wealth management entities investing on behalf of wealthy families. Many are now targeting healthcare due to its stability and long-term value.
- Characteristics:
- Capital Stack: 30–50% senior debt, 25–60% equity, optional seller note
- Leverage: Moderate and risk-conscious
- Seller Role: Often flexible—seller note, leaseback, or optional rollover equity
- Exit Horizon: 10–20+ years
- Best Fit: Owners looking for stability, legacy preservation, and optional real estate monetization
Key Insight: Family offices prioritize stewardship over flipping. If you want your practice and staff cared for over time, this may be your ideal buyer.
Private Equity Buyers
Private equity firms pool capital from institutional investors to buy, scale, and exit businesses at a profit within a few years. Healthcare roll-ups are a key target.
- Characteristics:
- Capital Stack: 50–70% debt, 20–40% equity, sometimes seller note or rollover
- Leverage: High (3.5x–6x EBITDA)
- Seller Role: Often includes rollover equity or structured earnouts
- Exit Horizon: 3–7 years
- Best Fit: Practices with strong EBITDA, scalable models, and owners seeking top dollar
Key Insight: Private equity brings maximum valuation potential, but often changes the operational DNA. If preserving culture is critical, clarify expectations early.
Side-by-Side Snapshot
| Feature | Search Fund | Family Office | Private Equity |
| Investment Horizon | 5–7 years | 10–20+ years | 3–7 years |
| Leverage | Low to moderate | Moderate | High |
| Seller Note | Common (10–25%) | Optional (flexible) | Rare or minimal |
| Rollover Equity | Sometimes | Optional | Frequently required |
| Buyer Type | Individual operator | Long-term investor | Institutional fund |
| Culture Fit | High priority | High priority | Medium priority |
What Should You Consider as a Physician Seller?
Selling your practice is more than just a transaction—it’s the transition of your life’s work. The right buyer isn’t just the one who pays the most; it’s the one whose capital structure, expectations, and values align with yours.
Here are some final questions to ask yourself:
- Do I want a quick exit or a gradual transition?
- Is preserving staff and patient care a top priority?
- Am I open to a seller note or reinvesting post-sale?
- Do I want to maintain ownership of the real estate?
Final Thought
Whether you’re nearing retirement or just exploring options, understanding the capital stack and mindset of your buyer puts you in control. At Strategic Medical Brokers, we help physicians navigate this process—ensuring that your practice, your staff, and your legacy are placed in the right hands.
Schedule a confidential discovery call to learn how we can guide your next step: www.strategicmedicalbrokers.com
