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Then and now: Who will buy your dental practice?

Dec. 14, 2022
When it comes to selling a dental practice, a lot has changed in the past 15 years—and this author understands this through his father's experience back in 2008.

In 2008, my father, a pediatric dentist from Montgomery, Alabama, began the process of selling his practice. Leading up to that decision, he worked diligently as a solo doctor each week for over 30 years to meet the oral health-care needs of the children in our city. Over the years, his team and business grew, as did the practice. By the time 2008 rolled around, he was seeing second- and even third-generation patients, he employed 12 team members, and he saw close to 100 children a day. His practice was a success by every measure: financially, culturally, and clinically.

But when it came time to sell the business, it was a challenge. It was no fault of the business or my father; there were simply not enough potential partners or buyers for his practice. That was 2008.

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What about selling today?

If my father was looking to sell that same business today, the process would be a bit different. In 2008, the buyer pool was rather limited: pediatric dentists, with a license to practice in the state of Alabama, who wanted to live and work in Montgomery and would qualify for a loan to buy the practice. In any given year, there might be one or two candidates that fit the bill.

Today, the buyer pool looks a bit different. I could connect him with a whole host of buyers, including:

  • Over 150 IDSOs/DSOs/DPOs backed by private equity
  • Hundreds of orthodontic practices looking to capture referrals and build vertical integration in their business
  • Thousands of dentist-founded and debt-funded groups
  • Hundreds of private equity and family funds looking for that one practice to acquire, learn from, and grow into a leading pediatric group in the region
  • Local pediatric dentists

He would be faced with more buyers offering higher prices than ever before. (Remember Econ 101? Increase demand, hold supply constant, and prices go up!)

Valuations and timing

In 2008, dentists did not have a lot of options when it came time to sell their practice. DSOs were just beginning to gain traction and close to 99% of all practice transitions at the time involved one doctor selling to another doctor. Today, 25%–30% of all practices are bought by a group, DSO, or private equity group (PEG). Times have changed. A lot. The value of a dental practice has never been higher.

  • Regional brokers still sell for 70% of collections to dentists, while we sell practices for 200%–400% of collections to IDSOs/DSOs/DPOs.
  • Sales that historically took brokers three to four years to sell are selling in six months (with a bidding war).
  • Postsale employment terms are based on what you want.

There is no better time to own or sell a dental practice. If you are looking to sell in the next one to three years and would like to learn the true value of your practice, visit TUSK Partners for a free valuation.

Education and transparency

If you are thinking about selling your practice in the next five years, talk with someone who truly knows the DSO space—we are always happy to talk with you. You deserve to know all of the options you have when it comes time to sell. Oh, and if you receive an unsolicited offer from a group, DSO, or PEG, don’t take the offer. They are not the only group who is interested in partnering with you, I promise.

Full circle

I was lucky enough to spend a couple of days with my father at the President’s Cup this year in Charlotte. We were hosting 50 of our dearest friends from the DSO industry at the tournament. Dad got to meet the team at TUSK, private equity investors, former clients, attorneys, CPAs, financial planners, and consultants who all work exclusively in the DSO community. He could not believe that there were so many wonderful people focused on ensuring that dentists maximize the value of the sale of their practice. It goes without saying that a lot has changed over the past 15 years in the business of dentistry. There are more buyers than ever who are interested in your practice. Do what you can to stay informed about the wide array of buyers and the prices they’re willing to pay.

Editor’s notes:

TUSK Partners is among Dental Economics’ financial supporters.

This article appeared in the December 2022 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.