PALM BEACH, Fla., Feb. 13, 2020 /PRNewswire/ -- On Tuesday, February 11, 2020, David C. Branch, Viper Equity Partners Principal, highlighted to Group Dentistry Now: "2019 was again another interesting time for the dental consolidation market. It marked the first time since 1995 that new smaller DSOs showed more acquisition growth than industry staples like Heartland and Aspen Dental. Competition has become fierce, and sellers are more educated in terms of deal structure. This paved the way for dental support organizations (DSOs) willing to pay multiples in the five to seven times range, offering ownership and attainable earn outs to easily 'win' deals away from companies not willing to evolve."
Another interesting change noted by David was the age of dentists joining DSOs: "2019 saw a younger seller market take shape with doctors from the mid-30s to late-40s becoming huge players. A key factor here was the ability for younger sellers to stay with the DSO longer, with a potentially huge exit payoff when they liquidate their stock. Further, many of today's DSOs are bloated with dentist partners in their upper management, which is very interesting to many sellers looking to come out from behind the chair and grow within the organization. A true win-win for all parties."
In 2020, we will see the same trends from 2019 with one area really taking shape—dental practice roll ups. Investment bankers have identified this area as a huge opportunity. Putting together 10 to 15 offices with between 5 and 10 million dollars in EBITDA makes sense. Depending on whether the group is integrated, and to what level, will determine the boost in value the group would get from the buyer.
Another big change will be a push further away from Medicaid. The risk factors and lack of understanding of Medicaid markets has just become unattractive with private equity-backed DSOs. David concluded: "In sum, the real action will be in the regional DSOs backed by family office money and the 'one specialty' buyers. The deal flexibility allowed by family office money and the low competition in specialty buyers will pave way to huge wins for those operators."
About Viper: Viper Equity Partners is America's leading M&A advisory and investment bank in dentistry, dermatology, and plastic surgery, with over $1.8 billion closed since 2009 and 110 transactions closed in 2019. Viper's M&A relationships with family office and private equity-funded organizations are unique. The Viper Team consults with practice-owning doctors and roll up groups from potential integration and marketing to offer negotiations and diligence to the closing table with high velocity. For more information, visit www.viperequitypartners.com.