Physician Practice Sale: ESOP Exit Strategy Options
- Employee stock ownership plans, or ESOPs, are gaining traction as a viable exit strategy for physician practices.
- Francia explained that an ESOP allows selling physicians to recieve fair market value for their practice while preserving their legacy.
- Bothner noted that while ESOP transactions might involve less cash upfront compared to customary mergers and acquisitions, they offer notable tax advantages.
Explore Employee Stock Ownership Plans (ESOPs) as a powerful exit strategy for physician practices. Learn how ESOPs provide a tax-advantaged path allowing physicians to receive fair market value while preserving their legacy and maintain control after the sale. Discover the benefits of leadership transition to existing management and key employees, offering adaptability to sell between 1% and 100% of your practice. Understand the tax advantages, including the potential to defer or eliminate capital gains taxes, and discover how employees benefit through the ESOP trust, receiving contributions without upfront costs. News Directory 3 reports these transactions can resolve divergent ownership objectives and maintain operations. Learn how esops can be structured to comply with corporate practice of medicine laws. Discover what’s next for your practice when considering this smart exit strategy.
Employee Stock Ownership Plans: An Exit Strategy for Physician Practices
Updated June 12, 2025
Employee stock ownership plans, or ESOPs, are gaining traction as a viable exit strategy for physician practices. Leonard Lipsky and Carly Eisenberg Hoinacki from Sheppard Mullin’s Healthcare Team spoke with Nick Francia and Sarah bothner of The Capital ESOP Group at UBS Financial Services Inc. to discuss the benefits and structure of thes transactions.
Francia explained that an ESOP allows selling physicians to recieve fair market value for their practice while preserving their legacy. Unlike selling to an external buyer, an ESOP facilitates leadership transition to existing management and key employees. Physicians can sell between 1% and 100% of their practice to the ESOP, retaining control if desired.
Bothner noted that while ESOP transactions might involve less cash upfront compared to customary mergers and acquisitions, they offer notable tax advantages. Sellers can defer or eliminate capital gains taxes and perhaps benefit from the practice’s future growth through partial transactions or warrants. An ESOP transaction can be a great fit for a practice with multiple owners who have different goals.
According to bothner,a common misconception is that employees must pay for company shares. In reality, the ESOP trust owns the shares, and employees receive contributions at no cost, creating a retirement benefit. Also, sellers can remain involved in the practice’s operations and management.
Lipsky inquired about the structure of ESOP transactions in states with corporate practice of medicine prohibitions. Francia confirmed that ESOPs are structured similarly to PC-MSO models,with the ESOP trust owning the management services institution (MSO). The ESOP appoints a trustee to manage the MSO for the employees’ benefit.
An ESOP transaction can provide selling physicians with a flexible, tax-efficient exit strategy in which they receive fair market value for their stake in the practice. At the same time,an ESOP allows them to preserve their legacy.
What’s next
Physician practices considering exit strategies should explore ESOPs as a flexible, tax-efficient option that allows them to maintain control and reward employees.