Once you've decided to sell your healthcare company, one of the biggest decisions you may need to make is which type of buyer you will choose. If your company attracts a variety of buyers, you're likely to have a choice between private equity (a financial buyer), search fund, and strategic buyer. All generally have the same goals in mind, but approach deals in different ways.
As M&A advisors, we at VERTESS are always being asked about the differences between these types of buyers. When selling your healthcare company, it's always a good idea to first determine your exit strategy. Are you looking to stay on during a transitional period and hand over the keys? Maintain rollover equity and keep running the company? Answering these and related post-sale questions will help you understand which type of buyer best fits your needs. Owners who skip this step tend to make the same handful of mistakes once a buyer is already at the table.
Our main goals as M&A advisors are to get a deal across the finish line for sellers and achieve the best valuation possible while making sure the buyer is one our clients approve of. Transactions are much more than the cash at close. Most transactions we're involved in see a seller net far more through a mix of rollover equity, seller-back financing, consulting agreements, and earnouts, and those opportunities vary by buyer type.
With that in mind, here's a closer look at the three predominant buyer types you're likely to encounter when it's time to sell your healthcare business.
Private Equity
Also known as a funded or financial buyer, a private equity buyer will almost always keep the acquired company's current executive team in place. Private equity transactions tend to include rollover equity and seller-back financing. Private equity groups (PEGs) typically acquire and manage a business for 5-7 years, then sell it for a profit.
PEGs usually look for more mature businesses rather than startups. These buyers often already have healthcare companies in their portfolio, sometimes in subsectors related to the company they're acquiring, and quite a few PEGs focus solely on healthcare.
A few additional points on PEG buyers: Most will lack deep expertise in your company's specific area of focus. PEGs expect a certain return on their investment and may use debt to finance the deal. They'll also spend significant time scrutinizing prospective acquisitions, including financials, budgets, bank statements, and audits.
Search Fund
Also known as unfunded sponsors, search funds, unlike PEGs and strategic buyers, want to both own and operate the businesses they acquire. A company's current CEO will no longer manage the business post-acquisition, though a search fund deal typically includes a short transition period with some compensation for the seller.
Search fund deals tend to be smaller — often too small for most PEGs to consider. Search funds generally look for businesses that have been profitable for at least five years and are growing. The upside of selling to a search fund is that the investors and investment team tend to bring deep knowledge and experience in your space, and they look for companies with strong growth potential and healthy balance sheets.
A key point to know about search funds: They generally don't have growth capital on hand at the time they make an offer. Search funds typically work through these five stages:
- Search for a company
- Make an offer
- Secure the funding needed to close
- Acquire the company
- Operate the company
When a search fund submits a letter of intent, it usually still needs to secure funding during due diligence, mostly from private investors or groups. That's part of why search fund transactions close less often than deals with buyers who arrive already funded. But the model has proven durable: Stanford's 2026 Search Fund Study, which tracks 862 funds formed since 1984, found an aggregate 33.9% pre-tax internal rate of return (IRR) and 4.75x return on invested capital through the end of 2025, and nearly 60% of search funds go on to successfully acquire a company. Unlike PEGs, there's no set turnaround timeline following a search fund acquisition. Search funds tend to hold on to assets much longer.
Strategic Buyers
These are typically what we call non-financial or "buy-and-build" buyers. Strategic buyers already operate in an adjacent market to the company they're considering. They tend to look for well-established businesses rather than startups, and they focus on products and services more than financials, looking for counterparts in new regions and better distribution channels. Strategic buyers want to boost their operations and add talent while achieving cost savings and synergies with existing assets. They're looking for economies of scale, on the theory that two combined companies are worth more than the sum of their parts.
Strategic buyers tend to pay a premium for the companies they acquire because they expect to net greater value from the combination. Following a transaction, an acquired company can expect growing pains and some loss of staff, particularly where services overlap. Strategic buyers also tend to have their sights set on reselling portfolio companies at a higher value down the road.
Choosing the Right Buyer for Your Business
Private equity still drives the bulk of healthcare deal flow today, but search funds and strategic buyers remain active and, in some cases, better fits depending on what you want out of a sale.
Private Equity | Search Fund | Strategic Buyer | |
Typical Hold Period | 5-7 years | Long-term, no set timeline | Indefinite |
Who runs the company | Current executive team stays | Searcher becomes CEO | Integrated into acquirer's operations |
Funding at time of offer | Fully funded | Often not yet secured | Fully funded |
Best fit for | More mature, established businesses | Profitable, growing businesses (smaller deals) | Well-established businesses with clear synergies |
Choosing the right type of buyer takes real work, and your priorities here usually come down to how involved you want to stay, how important staff and culture continuity is to you, and how much risk you're willing to take on deal financing. Working with an M&A advisor to determine your exit strategy and optimal buyer type before listing your business is one of the most effective steps you can take toward a successful close.
If you run a good company, finding a buyer is usually the easy part. Navigating what comes next is what determines the outcome. At VERTESS, we have extensive experience working with all three buyer types. We support our clients through the entire M&A process, including analyzing every prospective buyer and LOI submitted. Even after you've chosen a buyer, our work continues, helping ensure a smooth transition and a strong post-transaction partnership.
Reach out to learn more about how VERTESS has helped companies just like yours achieve a successful sale, or see what your business could be worth to get started.
About the Author
Gene has served as a commercial growth executive in several private equity-backed and public healthcare companies, such as Schering-Plough, Bayer, CCS Medical, Byram Healthcare, Numotion and most recently as the Chief Revenue Officer at Home Care Delivered. As an operator, he has dedicated his career to driving value creation through exponential revenue and profit growth, while also building cultures that empower people to thrive in competitive environments. Quigley's passion for creating deals has helped many companies platform and scale with highly successful mergers and acquisitions.