Common Deal Structures in MSO Transactions

How MSO and private equity healthcare deals are typically structured

As more physicians receive offers from MSOs and private equity–backed healthcare organizations, understanding how these transactions are structured becomes increasingly important.

Unlike traditional physician-to-physician practice sales, MSO transactions often involve more complex financial arrangements. These structures are designed to balance the interests of investors, physicians, and the long-term growth strategy of the organization.

While every transaction is unique, many MSO partnerships follow similar deal frameworks. Understanding these common structures can help physicians better interpret offers and evaluate the potential financial outcomes of a partnership.

The Initial Practice Acquisition

Most MSO transactions begin with the acquisition of a physician practice by a platform organization.

In this structure, the physician typically sells the business operations of the practice to the MSO while continuing to provide clinical services through a physician-owned entity.

The transaction often includes:

• A purchase of practice assets or management rights
• A management services agreement between the practice and the MSO
• An employment agreement outlining the physician’s ongoing role

This structure allows the MSO to manage business operations while physicians retain responsibility for clinical care.

Cash at Closing

A significant component of many MSO transactions is the cash payment made to the physician at closing.

This payment represents the purchase of the business value of the practice.

The amount of cash paid at closing may depend on several factors, including:

• Practice profitability
• Growth potential
• Specialty demand
• The size of the organization acquiring the practice

For many physicians, this payment provides liquidity and allows them to diversify personal investments outside the practice.

Equity Rollover Structures

Many MSO deals include an equity rollover, where the physician reinvests a portion of the sale proceeds into the larger organization.

Rather than receiving the entire purchase price in cash, a portion of the value is converted into ownership in the MSO or platform company.

This equity participation allows physicians to share in the future growth of the organization.

If the platform expands successfully and eventually sells to another investor or strategic buyer, the value of the equity may increase.

However, equity investments also carry risk, as their value depends on the long-term performance of the organization.

Platform vs. Add-On Acquisitions

In many MSO transactions, there is an important distinction between platform acquisitions and add-on acquisitions.

A platform acquisition typically involves a larger practice that becomes the foundation for the organization’s expansion within a specialty.

Platform practices often receive:

• Higher valuation multiples
• Larger equity participation opportunities
• Greater influence within the organization

An add-on acquisition, sometimes called a tuck-in acquisition, occurs when a smaller practice joins an existing platform.

Although add-on transactions may involve smaller deal sizes, they still play a key role in expanding the organization’s network of practices.

Earn-Out Agreements

Some MSO transactions include earn-out structures, where a portion of the purchase price depends on future performance.

For example, additional payments may be made if the practice achieves certain financial targets after joining the organization.

Earn-outs may be based on factors such as:

• Revenue growth
• EBITDA performance
• Provider productivity

These arrangements can create opportunities for physicians to increase the total value of the transaction, although they also introduce uncertainty since payments depend on future results.

Employment Agreements After the Sale

In most MSO transactions, physicians continue practicing within the organization after the sale.

This arrangement is typically governed by an employment agreement that defines:

• Physician compensation
• Productivity expectations
• Length of employment commitment
• Incentive structures

Compensation structures often shift from practice profits toward salary and productivity-based incentives.

Understanding these terms is an important part of evaluating the long-term financial impact of the transaction.

Recapitalization Events

Many private equity–backed healthcare platforms plan for a future recapitalization event.

A recapitalization typically occurs when the organization sells to a larger investor or strategic buyer after several years of growth.

If physicians hold equity in the organization, they may have the opportunity to sell that equity during the recapitalization.

This event can sometimes create significant financial upside if the platform has grown successfully.

However, the timing and outcome of recapitalization events depend on market conditions and organizational performance.

Structuring Deals to Align Incentives

One goal of many MSO transaction structures is to align the interests of physicians and investors.

Combining cash payments, equity participation, and performance incentives encourages physicians to remain engaged in the long-term growth of the organization.

When structured effectively, these arrangements allow physicians to benefit from both the immediate value of their practice and the future expansion of the platform.

What This Means for Physicians

MSO transactions often involve financial structures that differ significantly from traditional practice sales.

Understanding how deal components such as equity rollovers, earn-outs, and recapitalization events work can help physicians evaluate offers more effectively.

Because these deals can be complex, physicians often benefit from working with experienced advisors who can help analyze deal terms and negotiate structures that align with their goals.

Continue Reading

Now that you understand how MSO deals are commonly structured, the next step is learning about potential risks and red flags physicians should watch for when evaluating MSO partnerships.

Continue reading: Risks and Red Flags to Watch For in MSO Transactions →

Explore the full guide series:

• The Complete Guide to Selling Your Medical Practice
• How Medical Practice Valuation Works
• How to Buy a Medical Practice: A Buyer’s Guide
• Medical MSOs and Platform Companies
• Medical Practice M&A and Market Trends
• Medical Practice Transitions and Patient Communication
• Selling to an Associate or Internal Buyer

Considering an MSO Transaction?

If you are exploring the possibility of selling your medical practice to an MSO or private equity platform, understanding deal structures is an important step in evaluating your options.

Experienced advisors can help you review proposals, compare offers, and structure transactions that support your long-term financial and professional goals.

Contact us today to begin exploring your options.

About Bryan Sledge

Bryan Sledge is a CPA with over a decade of experience advising dental and medical practices on tax, accounting, and business strategy. He began his career at Deloitte advising Fortune 500 companies on tax planning and compliance, and brings extensive M&A experience supporting healthcare transactions from both the buyer and seller perspectives. He holds undergraduate and graduate accounting degrees from Texas A&M University's Mays Business School.

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