Aesthetics Conference Takeaways and Survey: Mergers & Acquisitions and the Economy

July 9, 2023

In this article for Modern Aesthetics, Bundy Group shares highlights from the 2023 American Academy of Dermatology Conference and survey of strategic buyers.

The American Academy of Dermatology (AAD) conference drew a substantial crowd, which included dermatology and plastic surgery practice owners, financial sponsors, and executives of active strategic buyer platforms in the industry. During the conference, Bundy Group held numerous meetings with CEOs and corporate development directors, all serving in organizations backed by financial sponsors, to better understand buyer sentiment for completing acquisitions the dermatology, plastic surgery, and medical spa professions in the current economic climate. In addition, and immediately after the conference, Bundy Group initiated a survey with the most active buyers in the segment. In short, these experienced professionals expressed enthusiasm over the state of the market and continued growth in the aesthetics market, but there are some considerations to note. Below are the major takeaways from the conference and the results of the post-conference survey.


One of the key topics from the conference was the current macroeconomic environment, including talk of recession and how it might impact plastic surgery and dermatology practices today. On the minds of owners and seasoned buyers were the potential negative impacts on practices due to the recent credit market challenges and the consequences from the Silicon Valley Bank and First Republic Bank failures. As one seasoned executive with a strategic platform stated, rising interest rates and tightening lending restrictions will “make us more selective in what practices we buy, as we can’t have foot faults in these conditions.” The executive further added, “our main lender is still supportive of our acquisition focus and growth efforts, and will provide funding, but it has tightened our credit line from $50MM to $25MM over the past few months.”


Aesthetics practices are still finding it difficult to find staff, which includes talented employee physicians, mid-levels, aestheticians, and administrative support. Wendy Lewis, President of Wendy Lewis Co., a boutique marketing communications group that specializes in the beauty, health, and wellness sectors, weighed in. “Staffing continues to be a big challenge for all practitioners as today’s employees are less likely to be loyal to employers and have set the bar quite high to stay long term.” She added, “Turnover of key staff members can have a significant impact on practices in terms of the loss of institutional memory, the inherent costs of training, and stress it puts on the staff and practitioners.”

At the AAD conference, practice owners and strategic buyers spoke about the challenges of recruiting talented providers to secondary markets and rural areas. As one recruiter for a strategic platform commented, “the young physicians and mid-levels often want to move to the large metropolitan markets, which presents challenges for our national organization.”


Bundy Group’s post-conference survey certainly validated insights received at AAD, and there were several new and enlightening takeaways. There were nine respondents, all in executive positions and highly experienced in dermatology and aesthetics acquisitions, who answered the questions and provided additional insights.


The majority of respondents are planning for a recession in the next 12 months. However, these industry players are expecting the aesthetics market to continue to grow during this same timeframe. Furthermore, each of these organizations is planning for their own businesses to grow in the next year. The participants’ confidence appears to validate the recession-resiliency of the aesthetics market.


The respondents signaled continued and strong interest in acquisitions. They indicated the dermatology market still has plenty of runway left for consolidation, as the respondents indicated the industry is only halfway through its aggregation cycle. Furthermore, on a 1 to 5 scale (1 = not looking for acquisitions; 5 = aggressively looking for acquisitions), the average and median response was a 4, indicating mergers and acquisitions (M&A) is alive and well with the brand name buyers in the dermatology industry. However, four of nine respondents did state current events in the financing markets have decreased their appetite for acquisitions in dermatology and aesthetics. As one executive stated, “Rising interest rates have resulted in our taking a more conservative approach to acquisitions, as we are now placing an increased emphasis on quality, growing practices.”


Although this group of nine buyers has its roots in dermatology, a number of these organizations have expanded into plastic surgery and medical spas while others have a heightened interest in making that move. In all, five of the nine survey respondents indicated that they are actively pursuing acquisitions in the plastic surgery sector, and four of the nine stated that they were actively pursuing acquisitions in the medical spa sector. Would most of these dermatology strategic platforms have answered no to these questions just a couple of years ago? While the plastic surgery and medical spa segments are of great interest to buyers, these buyers are also closely watching the impact of a 2023 recession on practices that operate in these segments.


Bundy Group receives from practice owners such common questions as, “What are the valuation multiples for practices today? Are they decreasing? How much is my practice worth?” These are topics Bundy Group is immersed in when we are representing an owner in a sale, as our firm’s goal is to maximize the practice’s valuation. Most survey respondents revealed they do expect practice valuations to decrease over the next 12 months compared to current levels. One executive stated he believes “valuation multiples will decrease by 0.5x to 1.0x.”1 Another respondent stated, “High quality assets will fetch historical valuations, but less attractive or higher risk transactions will see valuations reduced and less demand overall.”

While the subject of valuation is on everyone’s mind, an equally important topic is what compromises a practice’s valuation, also known as the transaction structure. Upfront cash from a buyer to a seller is an obvious component, but there is also creative structuring that can be utilized, which includes equity reinvestment by a seller,2 seller note,3 or earn-out.4 Buyers can, and sometimes do, utilize creative structuring to minimize risk and ensure the seller has a vested interest in future success of the practice. As one respondent stated, “We are asking for higher equity reinvestment from sellers today, such as 25% to 30% percent vs 15% to 25% in the past.”

We believe that the feedback given to the Bundy Group at the conference, and the post-conference survey, indicates a strong level of enthusiasm, both from a practice owner’s perspective and a buyer’s perspective. The multi-billion dollar aesthetics market continues to thrive and evolve, but macroeconomic headwinds could place some pressure on practices owners and consolidators; we see no loss of momentum in the aesthetics industry.

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