Private Equity in Plastic Surgery: A Nine-Year Analysis.

Abstract

Plastic surgery is a highly lucrative specialty that attracts private equity investors, who seek to consolidate physician practices through higher levels of operational efficiency and economies of scale.1 While private equity has been explored in other specialties, the extent of private equity engagement in plastic surgery is unknown.2,3 This study characterizes trends in private equity deals from 2011 to 2019. We hypothesized that there would be greater private equity investment toward companies with scalable business models, which include cosmetic products and retail clinics, as opposed to companies with a focus in regenerative medicine or devices that require extensive research and development efforts. A retrospective review of private equity deals was performed using Pitchbook (PitchBook, Seattle, Wash.), a market database comprising public information on companies and investors. Data were analyzed from deals posted in January 1, 2011, through December 31, 2019.4 The total amount (U.S. dollars) of private equity investment made to plastic surgery–related companies was identified. Six therapeutic areas were identified: cosmetic products (over-the-counter skincare products), dermatology (nonsurgical) physician practices, plastic surgeon physician practices, devices/lasers, retail clinics (including medical spas and franchise clinics), and regenerative medicine/biotechnology companies (composed of companies that offer tissue engineering and wound-healing solutions). From 2011 to 2019, private equity firms made 368 deals to 299 companies, totaling $3.3 billion. The total deal amount (mean, $708 million; range, $20 million to $2.53 billion) decreased (Fig. 1, above), while the total deal count (mean, 28; range, 7 to 52) increased from 2011 to 2019 (Fig. 1, below). Total investment amount by therapeutic areas was highest for devices/lasers ($1.6 billion, 47 percent, n = 32), followed by regenerative medicine/biotechnology ($694 million, 21 percent, n = 25), dermatology physician practices ($500 million, 15 percent, n = 157), retail clinics ($331 million, 10 percent, n = 38), cosmetic products ($140 million, 4 percent, n = 13), and plastic surgeon physician practices ($85 million, 3 percent, n = 31) (Fig. 2).Fig. 1.: Annual trends in private equity deals by investment amount (above) and number of investments (below).Fig. 2.: Total private equity investment amount by therapeutic area.Our study affirms the rise of private equity in plastic surgery–related companies, specifically in the number of deals from 2011 to 2019. Medical devices and lasers had the highest private equity investment. This could be attributed to higher average returns (21 times) compared to other market sectors, as well as higher research and development costs.5 Dermatology (nonsurgical) physician practices were engaged in the most private equity deals, similar to prior findings in the literature.2 In contrast, plastic surgery physician practices had the least private equity investment, perhaps a reflection of the greater operational challenges and lower returns relative to other company types. Future studies could explore the consideration of private equity firms in acquiring and managing plastic surgery practices. This study has several limitations that warrant consideration. First, our analysis does not have a record of all nonpublic funding investments. Second, the subjective characterization of investments may have introduced uncertainties and bias. Lastly, investments with undisclosed amounts were excluded, therefore underestimating total funding. There is a growing prominence of plastic surgery in multiple therapeutic areas. Moreover, device and regenerative medicine companies dominate private equity investment. Future studies could further explore the reasons for the relative paucity of funds in plastic surgery physician practices, compared to those in dermatology. While the database has limitations, this study is the first to provide insight on private equity engagement in plastic surgery. DISCLOSURE The authors have no commercial associations or financial disclosures that might pose or create a conflict of interest with information presented in this article. No funding was received for this work.