Everyone wants to dip their toe in the medical aesthetics space, and why not? It’s beautiful. But among platforms in this space, such as day spas, it’s the pure med spa that has longevity “because it mixes the experiential with the service and the clinical outcomes,” says Nicole Chiaramonte​  

In October 2022, Nicole founded Advanced MedAesthetic Partners, which now has 62 locations operated by “young, motivated entrepreneurs” who are hungry to grow their one or two locations into more. The partners are integrated under one umbrella, with standardized back office functions but individualized local patient experiences. With host Geoff Cockrell, Nicole explains AMP’s strategies for expansion and discusses one of the biggest trends in med spa: weight loss drugs. She also shares insights about risks in the industry, including competition, drying up of credit, and state legislation. As AMP approaches its two-year mark, she’s optimistic about what 2025 will bring. 

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

This is The Corner Series, a McGuireWoods series exploring business and legal issues prevalent in today's private equity industry. Tune in with McGuireWoods' partner, Geoff Cockrell, as he and specialists share real-world insight to help enhance your knowledge.

Thank you for joining another episode of The Corner Series. I'm your host, Geoff Cockrell. Here at The Corner Series, we bring together thought leaders, deal makers and executives at the intersection of healthcare and private equity. Today I'm joined by Nicole Chiaramonte, she's the founder and CEO of Advanced MedAesthetic, which is a med spa and related businesses. But Nicole, if you could give a quick introduction of yourself and maybe the background that brought you to where you are to start our conversation.

I'd be happy to, Geoff. We'll start with my background. It is highly entrepreneurial. I am the founder, owner, and investor in small businesses across many sectors, but I'd say my focus has really been the last 22 years on management service organizations. Started in legal, and then in 2012, moved into medical aesthetics by partnering with an oculoplastic surgeon. Fell in love with the industry right away, the people, the service mixes are wonderful, and the economics are fantastic.

So definitely knew that was the space I wanted to be in. Continued to start de novos. I did nine over the last 10 years or so and then partnered into struggling practices to help turn them around. So that was my history with medical aesthetics.

And then in 2019, private equity started reaching out and talking to me about consolidation, and although I wasn't quite ready for what they were proposing, I was absolutely inspired by the idea of the upside of consolidation, which was bringing those economies of scale, the resources, the data reporting and plugging that into small business.

So I started to have this vision for AMP, but I knew I needed the right capital partner, somebody who could see the world through the lens I was looking, and I found that with Leon Capital Group. It's a family office out of Dallas, an exceptional group of gentlemen who are not only capital sponsors, but they are truly business builders. So partnered with them, and October of 2022, Advanced MedAesthetic Partners was founded. We are now 62 locations that we built two through acquisition partnership and de novos, and we turned 20 months old last week, so it's been a hell of a 20 months. Looking forward to finishing this year strong and seeing what 2025 has to bring.

That's an amazing growth trajectory with a combination of both de novo and add-ons. How do you think about the balance between those two approaches?

M&A has been the heart of AMP. It was really our first 44 locations right out of the gate, and I love the partners, bringing on small business owners and bringing them into a partner position, but I do see de novo being a big part of our future. We have six that have launched this year. We'll do at least 10 next year, so we will do them in tandem, and there's advantages to both. Love the organic growth we can bring to the platform with de novos, but again, M&A will always be in our blood.

When I talk to entrepreneurs, especially with those that are using an M&A growth acquisition strategy, one of the challenges is integrating those various pieces that they're pulling in. How do you think about integration of things that you're acquiring from both an operational and cultural perspective?

Oh, that's an excellent question, especially when we had so many in such a short period of time, we learned every hard lesson that was out there, I think. There is a science to it once you get it down, and it's for us, we are a brand of brands. We are not a single nationwide brand, and we were very strategic and thoughtful about how we were going to move forward with that.

So with our integrations, we do bring everybody in under one umbrella, so we employ all the locations, we standardize the very specific things, so we are all on one EMR. That was one of the things that we did, we knew we were going to have to do right away. Everything that was required for really solid data reporting and financial reporting was first step. And then from there, operationally, the backend, we're looking to standardize.

So if somebody goes from our Florida practice to a Washington practice or New York to Beverly Hills, they can walk in and do their job in that other brand, in that other location because anything on the backend, back office is run the same way, but the patient experience is still very unique to their local community. We really do believe healthcare is local and the patients have that relationship with their local brand. So we're sticking with that, but standardizing everything on the backend.

As you're kind of growing and moving into other markets, how do you think about balancing the investing in the benefits of local density versus branching out into new markets?

We're doing a little bit of both. The way we look at it, we're partnering with owners who still want to [inaudible 00:05:13]. So everybody has a different direction that they're going. We are really looking for people who aren't opting to retire or at the end of their career. We have young motivated entrepreneurs who want to take their one or two locations to three to five locations. So we're expanding in a market and expanding a local or regional brand, but we are also branching out into markets that we've identified that are just underserved, which believe it or not, in aesthetics still happens often.

One of the challenges also that I encounter, especially in an acquisition strategy, is for folks of how to conceive of alignment going forward, and there's different kind of schools of thought on that. Some very emphatically think that everyone should be aligned at a top-co level, others think very emphatically that alignment through equity ownership should be at kind of subsidiaries that are more directly connected to what they're rolling in. How do you think about that kind of equity alignment with respect to people that you're acquiring?

In theory, I love the top-co. I love the idea of all partners together, and that's what we have at AMP currently. We have all these partners who are brought together and they're just as interested in the success of their own practice as the one across the country. It means the same to them and to their equity. That's how AMP was structured, and it is fantastic, but I will say that we haven't encountered where, for a couple people, it actually would've been better for them for the whole deal, for them to be part of maybe a junior ownership because they're just so personally and emotionally tied to only their location.

So very transparent answer there, but I would say I love overall the top-co. Everyone is involved in the success of the entire business. Overall, that has been successful for us because we have partners who are calling one another, helping one another locations who are taking best practices in one arena and instilling them in another market. So I still love that, but I definitely see the upside of just having someone focused on the structure and the profitability of their own location.

Maybe looking at the broader market a little bit, there's been a ton of investor interest in the aesthetics and med spa space. It's been a bit of a land grab as a lot of platforms have been seeking to establish themselves. How would you describe kind of the amount of green space there is from where you sit today, and what's the pathway forward for your company?

There's a tremendous amount of green space in M&A. I think there's still quite a bit in de novo as well, but the key there is the quality partners and the quality practices. So there's a tremendous amount of mom and pops is what we'll call them, just small business owners that probably are not ready for scalability. So it's out there. It's just I think we're all looking at this a little bit more carefully and identifying what is a successful acquisition and partnership.

Entrepreneurs by nature, we like to do it our own way, so they have to be willing to fit into an ecosystem. So as long as you're actually taking the time to figure out if this is going to be a good fit for a platform environment, there's still plenty of room.

One of the dynamics around kind of this particular sector is depending on kind of how medical you want to be, there can be very few barriers to entry for new participants. Do you view that as kind of a risk in the sector or as an opportunity?

There's a complexity there, and I'll start with the fact that the low barrier to entry is really around just an injectable focused practice. It's very easy for someone to set up their injectable practice with a few skin services just down the street, and so that does get challenging. What we see is they don't last long in the industry. In any given market, you're going to see somewhere between 5 and 15 of those pop up each year, and then next year I'd say 70% of those are gone.

If you're talking about pure play, full service medical spa, that's a higher barrier to entry. You have devices, you have to do a build out of quality, and that's really where we're focusing because those are the practices that are being built for longevity and to create a relationship with their community, focus on patient retention, but the low barrier to entry pop-ups, we see them disappear just as quickly as they show up.

There's quite a spectrum as you allude to on the medical versus nonmedical. There's also kind of further out on the medical spectrum. You see more pure dermatology practices wandering down into the med spa space. Do you see a convergence of those, or is it going to be still separate lanes?

Everyone's dipping their toe into aesthetics. It's a beautiful space to be in. You don't have to deal with rev cycle. It's cash pay. So you are seeing traditional dermatology move further into cosmetics, but overall, you have day spa, which is not medical at all. Then you have medical spa, which gives you that experience of the day spa with the services of, say, a derm practice. There's a very specific clientele who wants that, and then you have specific clientele who will only want to go to a doctor's office and be seen by a physician or PA in that more medical environment. But you're seeing everybody, even internal medicine doctors expand into this.

But I do think if everybody is touching on this space, the pure play med spa is going to be the one that lasts the longest because it mixes the experiential with the service and the clinical outcomes.

A number of different retail healthcare sectors have encountered headwinds is in the topic of recruiting and retention of people. It's been, for several years, a very tight labor market, and that has posed some challenges. How do you think about the topic of recruiting and retaining your people?

It's really the key to the business, not only at the four-wall, but at AMP as well. The people getting the right people, the right fit, giving them the training and employee retention is the core of our success, and it will be for any business moving forward in this space, primarily because the providers, there's not enough providers right now for the med spas in the demand. We are lucky enough that we have our own training programs in place that we can bring in somebody from entry level and a novice injector and then ramp them up to advanced intermediate to expert in a very short period of time. It costs a lot of money to do that, but it's worth it. And then we have this person who is not only loyal to us and our location, but they're very excited to be where they're at, so they're thankful.

I have to say, a med spa is a great place to work, especially if you're coming from ICU or the ER. The same applies to our administrative staff. So we're starting to treat those positions less like transitional jobs, the front desk, patient care coordinators, et cetera, and really putting those into career paths, and we're able to do that and allow people a career path beyond just the four walls, and that's really helping with employee retention because they see a future for themselves.

As a principally cash-pay business and a somewhat discretionary spend item, I would think that your sector is a little bit more exposed to broader economic forces that could crimp people's available spend on some of those areas. How volatile in connection with kind of overall economic volatility is the med spa business?

I think the way that we look at it, and we always say that it's recession-resistant and recession-resilient. We are feeling it. We feel a softening of the average ticket price. This lasts probably 9 to 12 months, but our average number of tickets is up. So you see the demand continues to grow, but people's free cash right now in indiscretionary spend is down a little bit. So what is encouraging about that is as the economy recovers, as people's confidence grow and their positioning gets stronger, we know those people will return and just spend more money ticket. So I'm feeling very good about where we are, but the industry itself, truly recession-resistant.

One of the explosive trends in the med spa space has been the introduction of weight loss drugs. It presents a number of complications, access to drugs, the cost of them. It's been a very evolving environment. How would you describe the impact of these weight loss drugs?

GLP-1s in general have really been transformational. A lot of our patients are on them. We're seeing health and wellness start to move into medical spas, so you are seeing a convergence there overall economically, and we're seeing it affect our body contouring, so CoolSculpting was down last year nationwide, not just in our platform, but across the board. You saw GLP-1s, people turning to that for what we will call the deep bulking.

What we see starting to pick up though is the surgery that comes from the skin tightening in addressing that sort of advanced weight loss. And we're also seeing people who were on GLP-1s for a significant period of time now using Botox and fillers when they otherwise may not have. So it's actually resulting in bringing new patients in for aesthetic treatments as they lose facial fat.

Do you think that there's a life cycle to that bump, both from the perspective of it's new and a lot of people are trying those drugs, but that may not be a sustainable level, there's questions around the accessibility of those drugs? Do you think that'll run a life cycle and be less significant, or are there any kind of inherent risks of leading too heavily into that? It feels like a complex topic.

It is a complex topic. I certainly don't have a crystal ball. I will say that I would avoid and recommend any business owner avoid leaning too heavily exclusively into that. It's a great add-on. It is a great, especially in aesthetics, if you offer it, then your patients are coming to you for it instead of the competition down the road and then potentially losing them as an aesthetics patient. So that's been the argument for bringing them into med spa.

Do I think it's bubble? No, I think this is here to stay. Accessibility, there's a whole conversation around that. We saw some letters go out this last week from Eli Lilly, and so the accessibility is certainly a question, but overall the patient demand, I don't see that going down anytime soon.

How price elastic do you think those drugs will be as those manufacturers are taking a more aggressive posture on some of the mixing of those drugs? Apart from them, the pricing could increase steeply, even if it is accessible. Do you think that'll have an impact on it, or is the demand just going to swamp any pricing limitations?

Pricing always will affect a certain level of demand, but I do think this is something that is life changing. We're seeing people just absolutely blossoming, for lack of a better term. I mean, we're seeing people lose 100, 150 pounds. And if you can do that and change someone's life, they're going to find a way to pay for it.

From where you sit, the pathway ahead is not all wide open and rosy for any business. What headwinds do you foresee on the horizon, or what risks keep you up at night?

Competition in this industry does continue to be a concern. I mean, as I said earlier, we see med spas and individual provider practices pop up. They go away just as quickly, but it is disruptive to the market. The liquidation sales, $8 Botox, things along those lines, that will continue to be a headwind ongoing.

Currently, we have softening ticket prices, so we're looking to at this point, and we're looking at the credit market and consumer debt to see what's on the horizon for our patient spending habits.

Financing is something that has been heavily relied on by a lot of medical spas, and we're seeing the credit dry up and availability, and even if they are still being approved, the amounts are a smaller rate.

Another headwind that aesthetic sees is related to state legislation. So every state has different laws related to our services specifically, and we're definitely seeing legislation come through. Things are in committee right now, and you're just always on the lookout for what is going to affect how your day-to-day operations occur, and who's going to be able to provide the services. So that's probably the biggest challenge for the medical spa industry as a whole.

Yeah, we see that as well, and that headwind can also be a tailwind in the sense that states taking a greater interest in maybe regulating and being interested in folks injecting people with things is not completely unreasonable. And we see a lot of the low barriers to entry somewhat rising as that scrutiny arises. So while it can be a headwind in the sense that compliance can be a taxing element, it also might not be a terrible thing if it created some barriers to entry from competition. So it can cut both ways.

Whenever I have an opportunity to chat with healthcare executives, especially ones that have worked with private equity investors, I always want to have a conversation around what the impact of private equity has been in their business, that the intersection of healthcare and private equity sometimes gets a black eye in the press in ways that always strike me as a little unfair, because from where I sit, the impact of private equity investing in a lot of different healthcare companies has been very, very expansive and increasing kind of access and improving outcomes. How would you describe your interaction with private equity and how has it impacted both your business and the patient experience?

Well, I'm lucky that my capital partner has really listened, and the one thing everybody says their industry is different. Med spa is very different than dental consolidation and optometry or ophthalmology because it's not one doctor running the practice and generating the revenue, it is a series of predominantly non-physician providers. And so when I explained to them the complexity of that, they listen.

So I would say overall, private equity has been a much better experience than I was concerned about in the beginning. Being able to take the advantages of the economy of scale, the data reporting, professionalizing the services and unburdening the location so they don't have to worry about HR and IT and their marketing. Doing all of that has actually allowed the practices just to focus on their teams, their culture, and their patients, and that's really was the goal of AMP. So being able to do that, plug those resources into those locations has been an exceptional experience. So in that way, I will say private equity probably got a bad rap.

Well, with that, I think we'll call it a wrap. Nicole, thank you for spending a few minutes with us. This was a ton of fun, and you've really built a fantastic business.

Thank you. I enjoyed it.

Thank you for joining us on this installment of The Corner Series. To learn more about today's discussion, please email host, Geoff Cockrell at gcockrell@mcguirewoods.com. We look forward to hearing from you.

This series was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this series, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state, and should not be construed as an offer to make or consider any investment or course of action.