Rising Consolidation in the Med Spa Industry: Mergers, Acquisitions, and MSO Partnerships Shaping Skincare and Aesthetic Technology

Consolidation amongst skin care, med tech companies and med spas has increased, inspiring rebranding and enhanced product lines to reflect colliding innovations and combined portfolios. Mergers and acquisitions activity is only expanding, along with MSO partnerships, as many owners look to strike a balance that preserves the essence of their practice while enhancing its efficiency and growth potential.

“Transitions in the medical aesthetics and wellness industry take many forms—buying, selling, merging, expanding or partnering with a larger group or organization,” says Chris Hubble, president of LuxMed Transition Strategies. “These changes often happen due to retirement, relocation, a desire to scale a business or seize new market opportunities.”

The 2024 American Med Spa Association report [1] found that only 3% of medical spas are owned by private equity firms, remaining consistent with its 2022 report. The association states, however, that given the emergence of a number of medical aesthetics-focused investment firms in recent years and some high-profile acquisitions, M&A are an industry-wide trend. Although this trend is still developing, it will likely become a larger factor in coming years, the association predicts.

Management Service Organizations (MSO) have also become a developing trend, as it handles the business side of operations, allowing medical professionals to focus on patient care. Med spas and practices are increasingly engaging in these transitions, Hubble says.

Mergers activity can broaden market reach and MSOs typically bring collaboration.Courtesy of aFotostock at Adobe StockMSO Partnerships: Streamlining Operations and Enhancing Growth Potential for Med Spas

MSOs for med spas essentially separate the medical practice from the business operations, allowing an MSO to handle administrative and non-clinical aspects so medical professionals can focus on patient care. 

MSOs typically bring collaboration through marketing, HR, compliance and purchasing power, Hubble says, allowing independent owners to focus on their clinical expertise. 

Hubble says retaining the practice’s brand and clinical autonomy can depend on the specific MSO, however. 

“The medical aesthetics and wellness industry is following the same consolidation path we’ve seen in dental and other healthcare verticals, just a few years behind,” Hubble says. “MSOs are becoming an increasingly attractive option for owners looking to reduce the burdens of business management while continuing to prioritize patient care.”

He warns that owners sometimes sign deals that seem lucrative on the surface but ultimately “leave money on the table” due to poor structure or unclear terms.  A vetting process through transion strategties presents offers that align with the owner's vision, whether it’s retaining equity, maintaining autonomy or maximizing value.

LuxMed uses its Julia.ai tool, an AI-driven matchmaker that analyzes financials, operational structures and cultural fit across a vast dataset to identify compatible MSOs for each practice owner.

Avoiding Common M&A Pitfalls: How LuxMed Ensures Med Spa Owners Make Informed, Strategic Decisions

Mergers activity can broaden market reach by combining resources and patient bases, Hubble explains, while practices looking to expand their footprint can acquire existing locations or establish new ones to integrate into their organizational structure.

The report [1] also reported 81% of medical spas are single-location, demonstrating a streamline for M&A activity, as consolidation can broaden menu options and services, as Hubble pointed out.

One of the most common mistakes Hubble sees owners experience when considering mergers or acquisitions is entering negotiations without a clear understanding of their practice’s true market value to merge with a structure that aligns with their goals, making transition strategies valuable as med spas search for an organizational structure that elevates their initial vision rather than clouding it. 

“Whether an owner is considering a full exit, a strategic merger or acquiring another practice to fuel growth, LuxMed makes sure owners have a clear financial picture and the right strategy in place to accomplish their vision for the future, [including] decisions that align with their long-term goals,” Hubble says. 

Navigating Med Spa Transitions in an Accelerating Market

Each transition comes with unique challenges and opportunities, he adds. Thoughtful planning and preparation is key to long-term success.

Hubble says consolidation within the aesthetics and med spa industry is accelerating, causing private equity groups and MSOs to become more selective, making it crucial for sellers to prepare proactively to maximize their leverage.

The first step in navigating any transition a med spa may undergo is understanding the owner’s personal goals and professional priorities, as med spas are typically a single location. Whether a practice owner wishes to remain involved in clinical care or prefers a less hands-on role, assessing the practice’s financial health and fair market value and equipping owners with the knowledge needed to evaluate MSO offers and M&A is cruicial. 

“We educate owners about the different deal structures available, such as partial equity rolls or full buyouts and analyze how each option aligns with their long-term vision,” Hubble says. “MSOs can offer significant advantages, but finding the right partnership is key.”

Hubble adds that it can be challenging for smaller or newly merged businesses to establish a distinct position in an increasingly competitive landscape as consolidation increases in the market. 

“It’s not just about surviving consolidation–it’s about thriving by leveraging what makes each practice exceptional while taking steps to ensure a sustainable and successful transition,” Hubble says. 

References:

1-https://americanmedspa.org/blog/2024-medical-spa-state-of-the-industry-executive-report-recap