Selling a dermatology practice to private equity

Where private equity stands in dermatology in 2026

Dermatology is the specialty private equity has owned the longest and bought the most of. Roughly 10 to 15 percent of dermatology practices are PE-owned. More than 35 platforms compete for the roughly 12,000 dermatologists in the country. A platform is the first large practice a private equity firm buys in a specialty. It becomes the base that smaller practices are attached to as add-ons. Advisors on both sides of these deals describe dermatology as the most mature and most saturated physician specialty.

The largest platforms include Advanced Dermatology and Cosmetic Surgery, Forefront Dermatology, Schweiger Dermatology, AQUA Dermatology, Platinum Dermatology Partners, QualDerm Partners, and U.S. Dermatology Partners. That last name carries a warning. U.S. Dermatology Partners defaulted on a loan in 2020 and has been controlled by its lenders since. When lenders take control of a platform, the physicians' rollover equity sits behind the lenders in the payment order and can be worth very little. Dermatology has had a decade of deals, and it now has a decade of results, both good and bad.

The pace has slowed. Physician practice deals fell 18 percent in 2025 and roughly in half in the first six months of 2026, though dermatology and eye care remained the busiest outpatient categories. Buyers are active, but they are buying small practices to add to existing platforms, not paying platform prices.

The second bite has a mixed record here. A second bite is the payout on your rollover equity when the platform itself is sold. Singh and Zhu, writing in Health Affairs Scholar in April 2024, found that 51.6 percent of the dermatology, ophthalmology, and GI practices acquired from 2016 through 2020 changed hands again within three years, and 97.8 percent of those resales went to another PE firm. That was the early cohort. Platform recapitalizations fell from about 100 a year in 2021 and 2022 to 13 in 2024, and hold periods now run 8 to 10 years. Our second bite page covers what that wait does to your equity.

What a dermatology practice is worth to a platform

Buyers price a practice as a multiple of EBITDA. EBITDA is your yearly profit before interest, taxes, depreciation, and amortization, after paying every physician a market salary. The buyer does not count the income you take home as an owner, only what is left after paying you as an employee, and that number is often much smaller than you expect. The scrape page explains how it is built.

These ranges come from FOCUS Investment Banking's November 2025 review and other sell-side trackers. They are indicative, not quotes. The gap between the add-on and platform rows is the buyer's business model: pay roughly 6 times for your practice, attach it to a platform that trades at roughly 13 times, and pocket the difference.

Several things push a dermatology practice toward the top of its range. The biggest is provider count: physician assistants and nurse practitioners who generate revenue without you in the room make the practice worth more because it does not depend on one person. Mohs surgery volume helps because it is procedural and reimbursed well. Cash-pay cosmetic and retail lines help because they do not depend on payer contracts. A pathology lab or other ancillary that the buyer can grow across its platform adds value, and so does a younger physician group that will stay through a long hold.

Other things pull the price down. A single provider whose departure would take the practice with them is the most common problem. Cosmetic revenue that patients associate with you personally gets discounted, because the buyer fears it will leave when you do. Owner add-backs that the quality of earnings review does not accept come straight out of EBITDA.

The deal terms dermatologists typically see

The textbook split is 70 percent cash at closing and 30 percent rollover, and 60 to 70 percent cash with 30 to 40 percent rollover is the common range. Rollover equity is the part of your price that you take as shares in the buyer's management company instead of cash. In 2025 and 2026, buyers have pushed more of the price into rollover, earnouts, holdbacks, and seller notes, so the cash portion has drifted down. The rollover equity page explains why those shares are worth whatever the next sale yields and can be worth nothing.

The scrape is the pay cut. The buyer typically takes 20 to 30 percent of practice profits, according to the Commonwealth Fund's April 2026 report, and your upfront check is largely a multiple of that forgone income. After closing, base salary is typically 40 to 50 percent of total compensation, compared with 60 to 80 percent before the deal, with the rest paid on work relative value units at reported rates of $40 to $70 per unit.

The employment agreement usually runs at least three years, with a clawback of part of your lump sum if you leave early. Five-year agreements are common. Non-competes are universal. Even in states that limit or ban employment non-competes, the sale-of-business carve-out survives, so you should assume the covenant will be enforced. Ancillaries at risk in dermatology are the cosmetic product line, aesthetics services, and any pathology income, because the buyer often moves those into the management company where you no longer share in them as an owner. The glossary defines these terms.

Tax issues specific to dermatology

The tax pillar covers the general rules. Here are the ones that bite dermatologists.

Lasers and cosmetic devices

Most dermatology practices have written off lasers, light-based devices, body contouring equipment, and similar gear using bonus depreciation or Section 179. When you sell, the gain on each device up to the depreciation you took is ordinary income under Section 1245, taxed at up to 37 percent federal rather than 20 percent. Section 453(i) requires that recapture to be recognized in the year of sale even if you are paid over time. Bonus depreciation is now permanent at 100 percent for property acquired after January 19, 2025, so this issue is getting larger, not smaller. California never conformed to bonus depreciation, so your California recapture will differ from the federal figure.

Cosmetic and retail lines in a separate entity

Many dermatologists hold cosmetic services or retail products in a separate LLC or med spa entity. That entity is sold on its own terms and needs its own purchase price allocation. Retail inventory is ordinary income, and if the entity is taxed as a partnership, its receivables and equipment recapture are ordinary under Section 751 no matter how the deal is papered.

Personal goodwill

Dermatology is a reputation business. Cosmetic patients in particular follow the physician. That makes personal goodwill a real option: goodwill that belongs to you rather than to your professional corporation can be sold by you directly as long-term capital gain, and in a C corporation it avoids a second layer of tax. The requirement, from Martin Ice Cream v. Commissioner (Tax Court, 1998), is that you are not already bound to your own corporation by an employment agreement and non-compete. If you are, the goodwill is the corporation's, and the IRS won that argument against a dentist in Howard v. United States (2010, affirmed 2011). Check your own documents before the letter of intent.

The non-compete allocation

Every dollar the contract allocates to your covenant not to compete is ordinary income to you at up to 37 percent, while the buyer deducts it over 15 years either way. Moving $2 million from goodwill to the non-compete costs roughly $300,000 or more in additional federal tax for the same headline price. Push back before you sign.

Reimbursement and regulatory headwinds to price in

Dermatology's reimbursement exposure is lower than that of surgical specialties because so much revenue is cosmetic and cash-pay. That cuts both ways, because cosmetic revenue rises and falls with consumer spending and a buyer's lender will treat it as less predictable than Medicare revenue.

The regulatory attention is real. Singh and colleagues, in JAMA Health Forum in September 2022, studied 578 PE-acquired dermatology, gastroenterology, and ophthalmology practices and found charges per claim rose 20 percent, allowed amounts rose 11 percent, and new patient visits rose 38 percent after acquisition. Findings like that are why states are moving. California's SB 351, effective January 1, 2026, bars PE groups and hedge funds involved with physician and dental practices from interfering with clinical judgment and voids non-compete and non-disparagement clauses inside management contracts, though traditional sale-of-business non-competes remain valid. Fourteen states now require advance notice of practice transactions. The FTC dropped its national non-compete rule on September 5, 2025 and formed a Healthcare Task Force on March 20, 2026, so enforcement is now case by case. If you practice in California or New York, the state pages cover the notice rules and the tax.

Who should not sell right now

• A dermatologist 15 or more years from retirement with a growing practice. You would give up 20 to 30 percent of your income for the rest of your career in exchange for one payment at an add-on multiple, then wait 8 to 10 years for a second bite.
• A solo Mohs surgeon or cosmetic dermatologist whose revenue depends on being in the room. The quality of earnings review will shrink your EBITDA, the multiple will land at the low end, and the non-compete will bind you for years.
• Anyone offered rollover in a heavily indebted platform. Ask for the platform's debt and preferred equity. The U.S. Dermatology Partners history shows what happens to physician equity when the lenders take over.
• A practice with a single unsolicited offer and no competing bid. Add-on prices with no competition are the weakest position a seller can be in. The should I sell page covers how to run a process instead.

If you already signed and regret it, the already sold page is the place to start.

What to do next

1. Run your own numbers before you respond to the offer

   Use the after-tax proceeds calculator with a realistic rollover share, a realistic scrape, and your equipment schedule.

2. Pull your depreciation schedule and your corporate documents

   Know how much Section 1245 recapture is sitting in your lasers and devices, and confirm whether you have an employment agreement or non-compete with your own corporation that would block a personal goodwill sale.

3. Ask the platform about its balance sheet

   Before you agree to roll 30 to 40 percent of your price, get the debt level, the preferred return terms, and the age of the fund that owns it.

4. Get an independent review before exclusivity starts

   The allocation, the rollover code section, and the employment terms can all still change before the letter of intent. Our case study shows what that review looked like for one dermatology partner, and the specialties hub compares dermatology to the other specialties we cover.