The dental industry in the United States, which grew to an estimated $40 billion projected value in 2021, has entered into an industry-wide consolidation cycle.
In contrast to the regions bearing high DSO activity, the Northeast has seen less relatively consolidation, although there have been some notable exceptions. The slower consolidation in this region can be attributed to a number of factors, not the least of which is the higher cost of doing business in the region, such as higher taxes and more regulation. States in the Northeast are also home to a relatively higher concentration of dentists on a per-capita basis. On a dentist-per-100,000 residents scale, the Northeast is host to 5 of the top-10 states: Massachusetts (1), New Jersey (3), New York (6), Connecticut (7), and Maryland (8). This regional concentration increases the market competition risk factors presented to DSOs when acquiring and consolidating independent practices.
A notable driver of this consolidation trend remains the steady capital influx from private equity firms and other investors in dental M&A activity. These firms are attracted to the stable cash flows and high-profit margins associated with dentistry, and have been driving consolidation through acquisition of independent practices and consolidating them under a single umbrella. For dental practices, joining a larger group can provide access to resources such as advanced technology, marketing and branding support, and centralized administrative services.
Despite these advantages, consolidation is not a feasible or desirable solution for all practices. This is another reason to take extensive steps when courting buyers, and ensuring they are an excellent fit for your practice. In some circumstances, larger dental groups may prioritize profits over patient care, leading to decreased quality of care, higher costs for patients, and a lack of personal relationships between dentists and patients. This is where having a broker who has a deep understanding of your business needs, combined with a network of DSO contacts and knowledge of their unique offerings, is invaluable.
Understanding WHO your partner is, and not simply focusing on the price and offer, is critical in the ongoing success of your practice culture and philosophy. Reach out if you would like to discuss transition options with one of our professionals.