Dermatology Market Update 2026: Second Bites, Regulatory Headwinds, and the Flight Toward Scale

After a few years of recalibration, the dermatology investment landscape is heating up once again. Renewed investor interest, evolving state-level regulations, and a clear shift toward larger, more sophisticated platforms are shaping a new phase of market activity. However, buyers are becoming increasingly selective, focusing on practices that demonstrate clinical excellence, strong market positioning, and long-term stability. As we look ahead to 2026, dermatology and medical aesthetic practice owners are asking:

What lies ahead for practice valuations and Mergers and Acquisitions (M&A) opportunities?

Below are the 4 key dynamics currently defining dermatology M&A.

Private Equity Exits

Private equity-backed dermatology groups that consolidated between 2016 and 2020 are now reaching maturity and considering their next liquidity event. In some instances, groups that recently tested the market were unable to secure an outcome compelling enough to move forward with a new buyer. As a result, they have remained with their existing private equity partner, which has limited their ability to pursue large acquisitions, since the PE sponsor is reluctant to deploy additional capital and is primarily focused on exiting and realizing the value they’ve already created.

On the other hand, as evidenced in the below transactions table, other platforms - such as Forefront Dermatology and Dermatology of Central States (DOCS Dermatology Group) - have already completed recent recapitalizations, where the founding PE sponsor exits or partially cashes out while bringing in a new capital partner to fund continued expansion. Groups that have recently taken on new capital partners have generally become more aggressive in pursuing select acquisitions, as M&A remains their primary growth engine. At the same time, private equity groups are conducting deeper diligence to ensure they are partnering with practices that align with their standards and prioritizing clinical excellence and longevity of the shareholders.

As an independent dermatology group exploring private equity, it’s critical to perform the same level of diligence on potential buyers as they will on you. Equally important, it is necessary to establish a clear governance framework that outlines how key decisions will be made. This ensures that protections remain intact through future liquidity events with private equity so the identity and culture of your practice are preserved.

Regulatory Headwinds Are Redrawing the Investment Map

While capital availability has improved, deal activity is being hindered by state-level regulations. Several states have introduced and passed legislation designed to restrict private equity ownership or management control of medical practices, and we expect additional states to follow suit – especially those watching early enforcement activity in places like Oregon and California.¹

This geographic divide between more favorable and more restrictive markets is pushing investors to adopt a more selective acquisition strategy. As a result, many private equity groups are avoiding new or expanded dermatology investments in restrictive states and are instead concentrating on markets with more advantageous corporate practice of medicine structures. In states with stricter requirements, the pool of interested buyers is much smaller, which limits options for practice owners and reduces competitive tension in a sale process. That said, activity is still occurring, and buyers are becoming more sophisticated in how they structure transactions in these jurisdictions.

Below is a high-level overview of how states currently fall with regards to the Corporate Practice of Medicine (CPOM).²

For physician owners in regulated states, early awareness of compliance obligations – often months before a transaction begins – is essential to avoid delays, penalties, or diminished buyer interest.

While these regulations can present challenges, deals are still getting done in many of these states

Investors Are Returning to Dermatology With Renewed Focus

Private equity groups are now re-entering dermatology and looking for independent practices to partner with as they work to build new platforms. They are aiming to apply the lessons learned from broader physician practice management and past missteps to create stronger, more successful organizations that further align with physicians.

Several factors are driving this renewed interest: the continued fragmentation of the dermatology space, the sector’s mix of medical necessity and elective cash-pay services, steady demand for skin health, the proven scalability of established platforms, and the growing desire among independent groups for alternatives to the limited set of existing platform options.

Recent data suggest that investor interest in physician specialties has broadened again, with dermatology reclaiming its position as one of the most active subsectors.³ Notably, both first-time entrants and long-standing healthcare sponsors are competing for high-quality assets, though with greater emphasis on operational discipline and compliance rigor than in prior waves.

This renewed energy signals a more measured, sustainable phase of consolidation - one defined less by rapid roll-ups and more by strategic partnerships built around infrastructure, governance, and long-term clinical alignment.

Larger, Infrastructure-Rich Platforms Are Now the Priority

Across the board, buyers are showing a strong preference for medium-to-large practices that already have professionalized infrastructure in place. Revenue scale, multi-site density, strong management teams, and integrated ancillary services have become major value drivers. Buyers are also prioritizing shareholder groups with younger, growth-oriented physicians who can remain active in the business long term and help continue to build the platform.

Smaller dermatology groups continue to attract attention, but they must increasingly present a credible path to scale and sustainability - either by joining existing platforms or demonstrating internal growth capability. Investors are less interested in fragmented solo practices and more focused on practices that can plug directly into a scalable operating model.

We are also seeing increased interest in practices that combine medical dermatology with aesthetics, med spa, or clinical research components. This horizontal diversification provides margin resilience and enhances platform defensibility amid reimbursement variability.

What This Means for Dermatology Practice Owners

For independent dermatology groups, these market dynamics create both opportunity and complexity. Even with headwinds in certain regions, dermatology remains one of the most active specialties in healthcare investment. Practices that emphasize on growth, clinical excellence, compliance, infrastructure, and scale will remain at the forefront of consolidation as investors reengage with the sector.

Practice owners should carefully evaluate all of their strategic options, with private equity being one of the potential considerations, as well as staying 100% physician-owned. They should also recognize that owning a practice today is harder than it was yesterday, and it will be even more challenging tomorrow. That being said, the opportunities available today may look very different in the future, and our team at PGP is grateful to be able to support practice owners as they navigate inflection points and once-in-a-lifetime strategic decisions.

About the Author

Michael Kroin is the CEO and Managing Partner of Physician Growth Partners (PGP), a nationally ranked healthcare investment banking firm focused exclusively on representing physician and founder-owned healthcare groups as they explore private equity and strategic M&A transactions. Under his leadership, PGP has advised on more than 75 completed transactions across healthcare services.

References

1. Cumming C. Oregon bill to block private-equity medical deals heads to governor’s desk. The Wall Street Journal. Published May 29, 2025. Accessed January 5, 2025. https://www.wsj.com/articles/oregon-bill-to-unwind-private-equity-medical-deals-heads-to-governors-desk-a9a7d252?gaa_at=eafs&gaa_n=AWEtsqe46wpoq0OIokfmv-F96vDnYnIXxMvr3j103SAEl11Vwh7Efs3hzA5jCkQfypg%3D&gaa_ts=695c1020&gaa_sig=Y2qaFN_MEuvq2I6qNnIIlUEqnyRciV5jkLCmeNXZzbMZgFLs0a--ty5Q7cU4QukPDdfK1UGN3uSJFdGV7QtQlg%3D%3D
2. Ahla Corporate Practice of Medicine (Ahla Members): A Fifty State Survey. American Health Lawyers Association; 2020.
3. Pitchbook Data, as of August 2025.