Is FOMO Entering the Private Equity Dynamic?

Orthopedics and podiatry are a highly fragmented market, making for a unique consolidation opportunity for private equity (PE). Growth is easy to measure with a total of eight PE firms that invested in orthopedic group platforms in 2020, and now there are 14 PE-backed orthopedic platforms focused on the musculoskeletal segment.

Earnings before interest, taxes, depreciation and amortization (EBIDTA)

EBIDTA, a common way to measure net profitability of a company, is a tool to value transactions that involve forward projections. A PE deal involves paying now for future income. This deal is expressed in a multiple of EBIDTA: EBIDTA x EBIDTA Multiple = Valuation.

Orthopedic and podiatry multiples differ

The strong demand is creating intense competition among private equity firms, hospitals, and strategic healthcare companies for orthopedic practices, leading to higher valuations. Current ranges for podiatry practices are 4% to 8% and 6% to 14% for orthopedic practices.