The Dentalpreneur Podcast: The Shifting Dental Consolidation Landscape: Parts 1 & 2
On this episode of The Dentalpreneur Podcast, we delve into the market dynamics reshaping dental practice sales, the vital role of sell-side advisors, and the changing landscape of DSO activity. Brannon offers his unique perspective on what DSOs seek in acquisition targets and how evolving DSO models impact dentists’ roles post-affiliation. Tune in for strategic insights on valuation tactics DSOs and private equity firms use in the dental space.
In part one of our discussion with Brannon Moncrief, we dive into the shifting currents of the dental practice sales market. Brannon unpacks the trend of younger dentists entering the seller’s market and the increasing attention from private equity, significantly influencing practice valuations. He underscores the critical role of sell-side advisors in enhancing sellers’ economic outcomes by negotiating favorable deal structures. We also examine the evolving purchasing behaviors of DSOs, especially under the influence of current economic factors like tightening capital markets. Brannon sheds light on the attributes that make a dental practice an attractive buy for DSOs, from the seller’s profile to the practice’s operational structure. Furthermore, he discusses how DSO affiliations are transforming, granting doctors greater post-sale autonomy and how these changes affect the valuation process. The conversation rounds out with a detailed analysis of the strategies and tactics DSOs employ in valuing dental practices, revealing how EBITDA adjustments, equity terms, and multiples are utilized in deal-making.
Part 2 of the series with Brannon Moncrief offers a comprehensive look into the financial mechanics behind private equity’s involvement with dental practices. We dissect recapitalization events, or ‘recaps’, and their significance for practice owners and investors. Brannon demystifies how private equity firms achieve substantial returns through strategic cost-averaging and leverage, illustrating these concepts with a real estate investment analogy. We also delve into the importance of financial advising during the sale of a dental practice, examining how expert guidance can be the difference between a good and a great sale outcome. Brannon contrasts the approaches to selling a dental practice, highlighting the advantages of employing a sell-side advisor versus direct dealings. Lastly, we explore the full spectrum of services that sell-side advisors provide, detailing how they support clients from the inception of the sale idea to the final transaction.
