The Evolving Landscape of Dental Mergers and Acquisitions
The dental mergers and acquisitions (M&A) sector has always been a dynamic field, intersecting skilled leadership, passionate practitioners, and cutting-edge technology. Despite a slowdown in industry transactions in 2023, with only a handful of platforms trading hands, astute founder-backed Dental Service Organizations (DSOs) and practice owners can take the time to enhance their business value now in anticipation of a market rebound.
This perspective is shared by Miguel Mireles, Director of Investment Banking at Skytale, who is a seasoned expert in the DSO M&A arena. In a recent Skytale Insights episode, Skytale Founder Ben Hernandez discussed with Miguel the timeline of the dental M&A market since the pandemic, covering phases of uncertainty, the 2021 boom, challenges from the Great Resignation, and the current situation.
2024 and 2025: Reasons to be Optimistic About Dental Mergers and Acquisitions
The year 2024 brings renewed optimism. Platforms that traded or were acquired by financial sponsors now have the capital to invest in acquiring businesses. Those that did not trade have been addressing debt issues, recapitalizing, and stabilizing financially. As a result, businesses are performing better. With potential interest rate cuts on the horizon, there is a positive momentum in dental M&A this year, with pent-up demand ready to be unleashed.
As platforms enhance their acquisition capabilities and diligence processes, owners should be prepared to sell. Understanding what buyers prioritize—particularly organic growth—is crucial. Below, we outline strategies to drive organic growth, increase business value, and attract buyer interest in the dental space.
Dental Strategies for Organic Growth and Attracting Buyers
Specialty Dentistry Drives Buyer Interest
While general dentistry M&A is well-covered and known, there has been a rise in specialty DSOs due to many compelling factors. Specialties like the $18 billion oral surgery market remain less consolidated, offer high profit margins, and due to a favorable doctor supply and demand dynamic, have organic growth potential. For instance, dental implant procedures are becoming a standard of care, which is driving demand and generating investor interest.
Multi-specialty platforms of scale are growing, creating ecosystems that leverage geographic density, drive expansion, and retain referrals in-house. Combinations like pediatric, orthodontic, and oral surgery services offer powerful synergies and create more options for patient care. Additionally, the cosmetic dentistry market, projected to grow at 7.1% annually until 2025, presents opportunities with treatments like teeth whitening and veneers gaining popularity due to many tailwinds like the “Zoom” effect and a general focus on aesthetics and appearance.
Overall, specialty services provide a way to differentiate a practice or platform. Many buyers aim to acquire specialties to achieve 30-40% revenue from these services.
In-Store Growth Through Dental Technology and Innovation
Technology acts as a force multiplier for organic growth by enhancing treatment outcomes, efficiency, and patient experience. Future leaders in the DSO space will be able to effectively harness technology to drive their businesses forward. Current examples include:
- 3D Printing: Enables same-day, full-mouth implants, revolutionizing practices by creating crowns, aligners, and surgical guides more efficiently, with higher precision and reduced costs.
- AI Tools: Improves scheduling, communication, imaging, and diagnosis, enhancing patient outcomes and operational efficiency.
- Robotics and Advanced Materials: Robotics automate repetitive tasks, and new biocompatible materials replace traditional options like amalgam fillings.
Embracing technology and innovation can make practices more attractive to buyers.
Add Value by Enhancing Patient Experience
An exceptional patient experience is key to unlocking organic growth. DSOs that elevate the patient journey and capture this in data will stand out to buyers. Whether aiming for acquisition or competitiveness, an outstanding patient experience is crucial.
- Staff Training and Strategic Design: From the first online interaction to in-office experiences, design every touchpoint to enhance patient satisfaction.
- Reducing Dental Anxiety: Techniques like VR simulations, entertainment options, and sedation dentistry can alleviate anxiety.
- Digital Tools and Customization: Digital tools enable personalized treatment plans, and same-day treatments offer convenience.
- Payment Plans and Sustainability: Flexible payment options and sustainable practices enhance patient experiences.
Small adjustments in patient experience can lead to significant improvements in case acceptance and performance indicators.
Prepare Your Business for the Future of Dental Mergers and Acquisitions
To dive deeper into our predictions about the next era of dental mergers and acquisitions, listen to Ben and Miguel’s full conversation on Skytale Insights. To take part in that future, reach out to our team. From driving organic growth to guiding the sale process, our management consultants and investment bankers offer extensive dental industry expertise. Learn more by contacting us.
