The Multiple Your Seller Thinks They Deserve vs. the One They'll Get

True story, anonymized: A physician founder walks into the first real conversation about selling his practice. Six locations. Decent reputation locally. But reimbursement pressure was building, margins were thinning, and he'd already closed one site. EBITDA sitting at $1M. He's done his research - or what he thinks is research - and he's anchored at 12x. That's $12M in his head. The market is paying 5-6.5x for a profile like his. That's $5-6.5M. The gap between his number and reality is $5.5-7M in value that doesn't exist.

That phantom valuation gap is where more physician practice deals collapse than at any other point in the process. Not diligence findings. Not financing contingencies. The expectation gap.

For bankers, if you let that gap survive into a formal process, you're running a sell-side that delivers bids 50%+ below where the seller anchored. That's a dead engagement and a burned relationship. For corp dev teams, you're spending three months diligencing a practice whose founder will never accept a price the market supports.

The physicians who can't be moved off their number aren't being irrational. They're working with bad information, processed through a lifetime of being right about most things.

When Cencora exercised its pre-negotiated call option to acquire the remainder of OneOncology at roughly 19x EBITDA - valuing the platform at $7.4B - that made the trade press. But that 19x wasn't a market-clearing auction price. It was a contractual multiple baked into a 2023 deal structure between Cencora and TPG, exercisable between years three and five. Cencora had already purchased a 35% stake and locked in that option on a 250+ physician national platform with drug distribution synergies that most practices will never have. When a 4-physician add-on in suburban Tampa trades at 8x, that doesn't make anyone's newsletter.

The information environment is structurally biased toward platform-level deals. The physician Googling "[specialty] practice valuation multiples" is reading about transactions that look nothing like theirs. Platform deals involve 30+ physicians, multi-state footprints, management infrastructure, and drug distribution synergies that justify premium multiples. A 6-location practice with $1M EBITDA is an add-on acquisition. The economics are fundamentally different.

Covenant Health Advisors' 2025 specialty benchmarks put most specialty care add-ons at 7-9x EBITDA. Industry transaction data generally shows platform transactions in the low-to-mid teens, compared to mid-to-high single digits for add-on acquisitions - a meaningful spread that physicians rarely appreciate. The physician didn't see those numbers. They saw the 19x headline.

Physicians talk to other physicians. And the conversations about practice sales have all the precision of fish stories.

"My friend's dermatology practice sold for 14x." Maybe. But that friend's practice had 22 locations, $8M EBITDA, a cosmetic revenue mix, and a bidding war between three PE platforms. The physician hearing that story has 6 locations and $1M EBITDA. Those are different transactions with different buyer pools and different multiples. But the number 14x is already lodged.

I've seen this dynamic in every specialty vertical I've worked in. The physician community is tight-knit, and deal terms travel fast - but without the context that makes those terms make sense. By the time the story reaches the third physician, the multiple went up and the caveats disappeared.

Some intermediaries anchor high to win the mandate. They'll tell the physician "we think we can get you 10-12x" knowing the market will deliver 5-6x. The logic is: win the engagement, run the process, let the market do the re-pricing, then manage expectations on the back end.

It's a strategy. But it creates a dynamic where the physician's first exposure to a professional valuation opinion is an inflated number. By the time the bids come in below that range, the physician feels misled - even if the bids are fair. The deal either dies or closes with a resentful seller, which is almost worse.

Physicians spent a decade in training learning to be the definitive authority in the room. Board exams, fellowship, attending rounds - the entire system reinforces that when they speak on their domain, they're right. In clinical medicine, they usually are. The confidence that makes a surgeon excellent at their job is the same confidence that makes a valuation conversation difficult.

I've never had a physician tell me their practice is worth less than they think. In eight years of transactions, not once. And I say that with respect - these are people who built something real, employed dozens of staff, and treated thousands of patients. The emotional attachment to the number isn't vanity. It's a reflection of what the practice represents to them.

The challenge is that "I'm confident in my assessment" doesn't pause when the physician shifts from reading pathology reports to reading term sheets. They approach the valuation the same way they'd approach a clinical question: research it, form a view, and hold conviction. The problem is their research sources are Google, a golf buddy, and a headline from Becker's.

One physician I worked with - sharp operator, sophisticated businessperson in every other respect - had his CFO build a valuation model using platform-level multiples for what was clearly an add-on practice. The model was well-built. The inputs were wrong. He'd done the work. He just didn't have the market context to know which comparables actually applied to his practice.

The physicians who handle this well have one thing in common: someone gave them the data early, with respect, and without dancing around it.

Lead with the comp table, not your opinion. The data does the work. When a physician sees 15 comparable transactions in their specialty, sorted by size and buyer type, with the median sitting at 8.2x - that carries more weight than any verbal explanation. The comp table is the most important slide in a sell-side pitch. For corp dev teams, it's the most important page in a pre-LOI conversation - whether you actually show it or not.

Name the platform vs. add-on distinction directly. "Your practice would be categorized as an add-on acquisition. Healthy add-ons in your specialty trade at 7-9x. Your practice's profile - reimbursement pressure, margin compression, a recent site closure - puts you at 5-6.5x. Platform transactions - groups with 25+ physicians, multi-market footprints, and management infrastructure - trade at 12-15x. The headline numbers in the press are platform deals." That framing is specific, factual, and doesn't diminish the practice. It explains the market.

Acknowledge the gap before they have to raise it. Physicians give patients difficult diagnoses every day. They respect directness. What they can't tolerate is feeling like they're being managed or patronized. If you know the physician is anchored at 12x and the market says 5-6x, say so. "The market for practices with your profile is currently 5-6.5x EBITDA. That may be lower than what you've seen reported for larger transactions. Here's why, and here's what we can do to position your practice at the top of that range."

Frame value creation, not value limitation. Start with "your practice is worth 5-6x today" and immediately follow with "here's what a structured process looks like that gets you to the top of that range, and here's what the post-close structure can add through earnouts, equity rollovers, and employment terms." The total consideration package in physician M&A regularly exceeds the headline multiple once you layer in real estate, employment agreements, and tax structure optimization.

Respect the ego. Challenge the assumption. These two things are not in tension. The physician built something worth acquiring. The market prices it at a specific range. Both things are true at the same time. The deals that close are the ones where the physician feels respected throughout the process. The deals that die are the ones where the physician felt talked down to - even if the number was right.

For bankers: This conversation has to happen before the engagement letter is signed. If you pitch a process at 10-12x and deliver bids at 5-6x, you've lost the client and the reputation. Bain's 2026 Global Healthcare PE Report notes that physician group investment has moved beyond traditional buy-and-build toward integrated, clinician-centric models with greater operational sophistication - which means buyers are more disciplined on pricing than they were in 2021. Your pitch should include a realistic comp set, a clear explanation of where the practice sits relative to the market, and a conversation about what drives premium vs. discount within the range. That's how you win the mandate and keep the relationship.

For corp dev teams: Screen for the expectation gap before you invest diligence hours. A 15-minute conversation about valuation range saves three months of work on a deal that was never going to price. The physician who immediately pushes back on 6x with "my friend sold for 14x" is giving you information. Use it. Either invest the time to reset expectations - with data, not pressure - or move to the next prospect and revisit when the market has educated them.

The valuation conversation is the hardest one in physician practice M&A because it sits at the intersection of data and identity. The physician's sense of what their practice is worth is tied to 20 years of work, sacrifice, and reputation. That deserves respect. The market's pricing of their practice is tied to comps, multiples, and buyer economics. That deserves accuracy.

The professionals who do this well hold both of those truths at the same time. They show up with better data than the physician has, they deliver it with more directness than the physician expects, and they leave the conversation with the physician's trust intact.

That's the edge. And it starts long before the spreadsheet opens.

If you're running sell-side origination or building a buy-side pipeline and the expectation gap is slowing your deal flow, we can help. Our market and sourcing intelligence deliverables include the valuation context, competitive landscape, and practice-level enrichment that make these conversations easier to start and easier to close.

Book a call | LinkedIn | Healthcare M&AI

-Shawn

On Thursday: The physician who told me he'd never sell - and the four signals that told me he would within 12 months.

What's the one thing you wish sellers understood before the first valuation conversation? Reply to this email - I read every response.

This newsletter is for informational purposes only and does not constitute investment, legal, or financial advice.