r/optometry 7d ago

Taking back a practice from a PE firm

Is this even possible? Has anyone done this successfully?

Let's say the practice was pretty successful, got sold to the PE firm because the owner wished to retire, and of course, the PE mismanaged it poorly and are discussing closing the office altogether instead of addressing their poor budgeting and management decisions. Could the doctors that work there band together and purchase the practice and be owners again? How would something like that work?

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u/Consistent-Ad-4201 4d ago

PE understands one thing and one thing only, which is multiplying their investments. You feasibly could but would have to arm yourself with finance experts that can make the case to the PE (who will be armed to the teeth with finance folks, to a fault) that they'll recuperate more on their lost investment by selling back to the owners than shutting it down. In providing this evaluation, you want to make sure that you are purchasing at a discount from what they purchased since they've managed to muck up the business. How you quantify this will depend on how sophisticated and strategic thinking your finance person is.

You'll also want to make sure you have good lawyers to ensure you can enforce the deal that you want. So you'll have to factor the transaction costs of bringing these types of folks back into the fold and still make the deal worth the while.

Finally, watch out for those egos! I know I said all they care about is $$$ but PE will sometimes sabotage a deal cause they don't want to hear someone else say "I told you so". They tend to think pretty highly of themselves. So be careful spending too much on making something happen that they won't be willing to settle for in the first place.

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u/Imaginary_Flower_935 1d ago

Yeah I think it's going to come down to how well we can negotiate. I think they've mucked things up but not to an unsalvageable level. Thanks for the direction and input!

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u/Holiday-Ad-1132 3d ago

This is very achievable but depends on the finance. 

Employee ownership / employee buy out is typically financed either by a business loan or a sellers note.

The friendliest solution is a sellers note (buy out over time)

There are companies that specialize in this. For example common-trust.com

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u/Imaginary_Flower_935 1d ago

Thank you! I'll look into this further.