Multi-Location Physical Therapy Practice
This transaction involved the acquisition of a multi-location outpatient physical therapy business based in the Southeastern United States. The business operated five clinics across two metro markets and specialized in orthopedic rehabilitation, sports injury treatment, and post-operative care. Founded twelve years ago by a licensed physical therapist and her husband, the company had grown steadily through physician referrals and word-of-mouth, generating $5.4 million in annual revenue with approximately $880,000 in adjusted EBITDA. The business had built strong brand equity in its service area and was known for clinical outcomes, patient satisfaction, and a high rate of referring orthopedic surgeons who valued the company’s manual therapy approach and 1:1 treatment philosophy.
The deal structure was complex but intentional. The buyer a former health systems administrator backed by a small fund negotiated a full asset purchase of the operating business while leasing the underlying real estate (three of the five locations were owned by the sellers in separate LLCs). The purchase price for the business was $3.95 million, with an additional structured option to purchase the real estate at a pre-agreed valuation 24 months after closing. The business purchase was funded using a standard SBA 7(a) loan for $2.96 million (75%), with $592,500 in buyer equity (15%), and a $397,500 seller note on standby for 12 months. A performance-based earn-out was layered on top, tied to therapist retention and patient volume continuity at each location.
All five clinics were operating near full capacity with 17 full-time therapists and 6 part-time therapy assistants. Each clinic was staffed with a front desk coordinator, a therapy tech, and a clinic lead. The seller, a licensed PT, had stepped back from clinical care but still played a significant role in quality assurance, marketing, and hiring. She agreed to remain for 18 months post-close as the clinical director under a defined scope of work. Her husband, who handled HR, insurance credentialing, and facilities, planned a full exit. Both had strong institutional knowledge, and their departure was seen as a long-term risk, mitigated through a tiered compensation plan and a retention-driven earn-out.
The earn-out structure was designed to address continuity risk. A total of $300,000 in future payments was contingent upon 85% of full-time therapists remaining employed at the end of each year for the first two years. The payment would vest in two tranches $150,000 each based on therapist retention and volume thresholds at each clinic. This aligned seller incentives with buyer needs and ensured a smooth handoff of patient care teams without disruption to revenue.
Revenue sources were diversified across private insurance (60%), Medicare (25%), workers compensation (10%), and cash-pay (5%). The business had strong billing practices and clean AR aging, with less than 3% of accounts more than 90 days past due. It used WebPT for scheduling and EMR, integrated with Therabill for insurance claims and payments. Gross margins averaged 55%, and EBITDA margins remained strong due to high productivity and limited administrative overhead.
Referrals came from a network of 120 orthopedic, pain management, and primary care physicians. Over 70% of referrals originated from just 25 core doctors, most of whom had worked with the practice for more than five years. The seller provided an introduction plan, including face-to-face meetings, co-marketing events, and co-authored rehab protocols for surgical patients. All referring physicians signed letters of support indicating they would continue to refer under the new ownership.
The real estate was owned in three separate entities and leased to the practice at favorable rates: $19/sf gross, with triple-net conversion post-close. The buyer negotiated 5-year leases with renewal options and purchase options at pre-agreed valuations tied to recent appraisals. These leases ensured continuity and gave the buyer the option to consolidate ownership once cash flow stabilized. Two other locations were in third-party leased spaces under assignable leases. One of these locations was slated for relocation into a larger facility within 18 months to meet demand, which the buyer had already scoped with a local real estate broker.
The company’s clinical reputation was anchored in patient outcomes and therapist training. Each PT was credentialed and underwent quarterly training in manual therapy, dry needling, vestibular rehab, or sports-specific protocols. Patient outcomes were tracked via FOTO (Focus On Therapeutic Outcomes), a national benchmarking tool used to measure recovery time, functional scores, and satisfaction. The company’s results consistently ranked in the 90th percentile nationally. Additionally, the company had an active social media presence and a YouTube channel with exercise demos and rehab tips, which generated appointment bookings and reinforced authority in the market.
Staff tenure averaged 5.6 years among therapists, and the company boasted a culture of mentorship, autonomy, and patient-first philosophy. The buyer retained all team members and implemented a new compensation model that tied bonuses to RUG (resource utilization group) scores, productivity, and patient satisfaction. Clinical autonomy was preserved, and the seller’s presence helped reassure staff that the values of the company would remain intact.
From a legal standpoint, the deal was structured as an asset purchase, transferring all patient records, provider agreements, licenses, insurance contracts, and business assets. Non-compete agreements were executed with both sellers and key therapy staff, and HIPAA compliance protocols were reviewed and re-certified by a third-party consultant post-close. Business insurance was updated to include malpractice coverage, cyber liability, and general business interruption insurance, meeting all SBA lender requirements.
The diligence process included credentialing reviews, payer audits, referral source stability analysis, and building condition assessments. No major red flags emerged. The buyer worked with a healthcare attorney to review Stark Law and Anti-Kickback compliance due to the nature of referral patterns, and all contracts were deemed free of improper inducements. The business had a compliance officer and followed a clear documentation process for all physician relationships.
The growth plan involved de novo expansion into two adjacent suburbs, adding hand therapy as a service line, and exploring partnerships with orthopedic ASCs (ambulatory surgery centers) for post-op rehab packages. Additionally, the buyer planned to centralize billing, add a referral CRM, and invest in local sponsorships to increase community presence. Within six months of closing, volume increased by 11% as one location extended evening hours and added a second PT to meet demand. A telehealth pilot was also launched, providing virtual rehab check-ins for post-op patients.
Revenue reached $5.8 million in the first 12 months post-close, with EBITDA increasing to $975,000 due to productivity gains and improved payer mix. The buyer triggered the first $150,000 earn-out payment to the sellers after therapist retention hit 94% and volume remained stable across all clinics. Plans to exercise the real estate purchase options were underway, supported by a 504 loan in progress.
This acquisition demonstrates how a service-based healthcare business with licensed professionals, stable referral sources, and high retention can be acquired through creative structuring. The use of SBA financing, real estate leasebacks, and performance-based earn-outs reduced risk, aligned incentives, and created a path to full ownership over time while preserving cultural and clinical integrity. The buyer achieved operational control, immediate cash flow, and growth momentum without compromising patient outcomes or staff morale, making this a model acquisition in the healthcare services sector.
