Key business, legal and compliance considerations for owners and managers of med spa and wellness practices exploring partnerships including mergers and acquisitions.
I. Business Considerations
Maximizing Value
- Understanding Business Valuation: It’s critical to know the value of the business through formal assessments, considering factors such as profitability, growth potential, industry trends, and intangible assets (e.g., intellectual property, brand equity).
- Financial Statements and Reporting: Clean and accurate financials, including audited statements, demonstrate reliability to potential buyers and can significantly impact valuation.
- Employee and Stakeholder Alignment: Retaining key employees and ensuring they are aligned with the future success of the business is essential. This may involve creating incentive plans or retention bonuses.
Preparing for Due Diligence
- Organizing Documentation: Buyers will require comprehensive due diligence. Founders should ensure that financial records, contracts, intellectual property rights, employment agreements, and compliance documents are well-organized and up to date.
- Tax and Legal Preparation: Addressing potential tax liabilities and legal concerns early can prevent issues that might arise during negotiations or due diligence.
Succession Planning
- Leadership Continuity: Buyers will want to know that the business can operate smoothly post-exit. Founders should establish a strong management team that can run the business independently of the founder.
Personal Considerations
- Post-Exit Life: Founders should consider their goals and needs post-exit, whether it involves starting new ventures, personal wealth management, or lifestyle changes. They should have a clear plan for life after the business.
- Emotional Readiness: Selling a business can be emotionally challenging for founders, especially for businesses they have built over the years. Preparing mentally for the transition is just as important as financial or operational readiness.
II. Legal and Compliance Considerations
Ensuring Provider Compliance
Healthcare providers must operate within their licensed scope. Ensuring compliance with state laws is essential for med spas.
- Providers must always operate within the scope of their professional license.
- Med spas typically employ physicians, nurse practitioners, physician assistants, and registered nurses.
- State law dictates which services providers can offer.
- It is vital to ensure providers operate within their licensed scope.
- Adhering to professional standards is mandatory; violations can lead to disciplinary action.
Understanding Supervision and Delegation
Different states have varying regulations on supervision and delegation of treatments. Understanding these laws ensures compliant operation.
- States allow mid-level providers like physician assistants and nurse practitioners to perform certain treatments with different levels of supervision.
- Supervision requirements can range from direct performance, supervision, or just being onsite.
- Some states permit remote supervision using audiovisual technology.
- Delegation of treatments must come from a physician after establishing a patient relationship.
- States may increase restrictions on remote supervision, potentially requiring onsite presence.
Licensure and Ownership Transitions
Entity-level licensing is required in some states. Ownership changes also come with specific regulatory requirements.
- Some states require med spas to hold entity-level licenses or permits.
- Example: Illinois requires med spas to be registered; Texas mandates licenses for laser hair removal facilities.
- Med spa equipment may need special permits or registration.
- Ownership changes may require applying for new licenses within a specific timeframe, such as 30 days in Texas.
Navigating Corporate Practice Laws
Understanding the corporate practice of medicine (CPOM) is crucial for med spa ownership. CPOM regulations vary by state and dictate who can own medical practices.
- CPOM regulates the ownership of professional entities by non-licensed professionals.
- It applies when medical services are within a healthcare professional’s scope and regulated by the state medical board.
- Med spas offering medical services must adhere to state-specific CPOM doctrines.
- Treatments like lasers and injections are often considered within the practice of medicine or nursing.
- Non-physician owners can invest using a friendly professional entity model tailored to each state's CPOM doctrines.
How Houlihan Capital Can Help
Houlihan Capital provides expert advisory services to med spa and wellness businesses seeking to navigate mergers and acquisitions, strategic partnerships, and compliance challenges. Our team offers comprehensive valuation, transaction advisory, and operational planning to help you achieve your business goals.
If you or your clients are interested in selling their Med Spa or Wellness business, please contact:
Frank Martinez
Vice President
fmartinez@houlihancapital.com
