Resources for dental offices
Mergers and acquisitions (M&A) are becoming a central part of how dental practices grow, evolve, and change ownership. Whether you're thinking about selling, expanding into new markets, or simply keeping up with industry trends, it's helpful to understand why M&A activity is increasing and what it might mean for your future.
Drivers Behind Dental Mergers and Acquisitions
Several economic, operational, and demographic factors are driving the increase in dental M&A activity. These shifts are influencing both how practices compete and how dentists think about ownership, succession, and long-term growth.
Margin Pressure and Rising Costs
Staffing, lab fees, technology, and payer challenges are pushing independent practices toward consolidation. Larger groups reduce overhead by spreading costs and securing better vendor and insurance contracts.
Access to Capital
Private equity and DSOs offer funding that most individual dentists can’t match. This capital supports upgrades, multi-location expansion, and stronger post-sale investment, benefiting both buyers and sellers.
Growth and Diversification
Acquisitions allow fast expansion into new markets or specialties. A general practice might acquire an ortho office to broaden services. Larger buyers often target high-revenue practices to grow market share and strengthen payer negotiations.
Workforce Demographics
New dentists often prefer salaried roles over ownership due to debt and lifestyle preferences. Many retiring dentists lack internal successors, making DSOs a practical exit route.
Compliance and Tech Demands
Cybersecurity, HIPAA, and digital recordkeeping are increasingly complex. Larger organizations manage these burdens more easily, reducing risk for both patients and staff.
Patient Expectations
Patients expect modern tools, online access, and consistent service. DSOs are structured to meet these demands through centralized marketing, tech, and operations.
Financial Considerations and Practice Valuation
Knowing the value of your dental practice is a crucial step in any M&A deal. Buyers and sellers often approach valuation from different angles, so it's important to understand how value is typically assessed in the dental industry.
Most valuations fall into one of three categories:
Income-based: This approach looks at how much money your practice is expected to make in the future. Tools like discounted cash flow (DCF) models or capitalization of earnings are used to estimate value based on current and projected profitability.
Market-based: This compares your practice to recent sales of similar dental practices. Multiples of earnings before interest, taxes, depreciation, and amortization (EBITDA) are often used. General practices may sell for 3.5x to 7x EBITDA, while large, multi-specialty, or highly profitable practices can go even higher.
Asset-based: This method totals the value of your tangible (equipment, supplies) and intangible (goodwill, brand reputation) assets, then subtracts liabilities.
Other factors, like your location, patient base, payer mix, and how modern your technology is, also influence the final number. In general, dental practices tend to command higher valuations than many primary care medical practices due to more consistent revenue and higher margins.
Due Diligence in Dental Mergers and Acquisitions
Due diligence is your opportunity to confirm financial performance, identify operational risks, and check legal and regulatory compliance before closing a deal.
Financial Due Diligence
Review at least three years of financials, including production reports, collections, insurance breakdowns, and KPIs like provider productivity and hygiene recall rates. Watch for red flags such as declining or inconsistent production, overdependence on a single provider or payer, or major fluctuations in revenue that don’t match patient volume trends.
Legal and Compliance Review
Verify ownership structure, leases, vendor contracts, malpractice insurance, and compliance with HIPAA, OSHA, and state dental board rules. Be cautious of any pending litigation, unresolved compliance violations, or ownership models that don’t align with your state’s legal requirements, particularly in deals involving DSOs.
Operational and Clinical Review
Evaluate staffing levels, team turnover, scheduling systems, and patient records. High staff turnover can indicate management issues or low morale. Look for consistent treatment planning, proper documentation, and established SOPs. Gaps in documentation or inconsistent protocols may increase malpractice exposure and reduce long-term patient retention.
Technology and Equipment
Assess equipment condition, software systems, and cybersecurity protocols. Outdated or non-functional equipment, unsupported software, or a lack of basic cybersecurity standards can all increase transition costs and slow integration. Take note of any deferred upgrades that could become immediate capital expenses after the deal closes.
Patient Base and Recall
Review patient charts, including active and inactive files, as well as hygiene recall systems. Low patient recall rates or a high percentage of inactive charts may point to retention problems or missed revenue opportunities. These issues often require operational improvements post-acquisition and can signal deeper problems with team workflows or patient engagement.
Legal and Regulatory Framework
Dental practice sales involve state-specific ownership laws, healthcare regulations, and employment rules that must be carefully managed to avoid delays or compliance issues.
Ownership and Control
Many states prohibit non-dentists from owning or controlling clinical operations. DSO agreements must preserve dentist autonomy in all clinical matters, with non-dentists limited to administrative support.
Patient Records and HIPAA
HIPAA allows the transfer of patient records in a sale, but practices must follow proper notification procedures and confirm that the buyer will handle protected health information (PHI) in a compliant manner.
Employment Transitions
In asset sales, employment is typically terminated and re-offered under new terms. Buyers should review staff contracts, non-competes, compensation structures, and benefits to avoid misunderstandings or turnover.
Deal Structure Impacts
Asset sales: Most common. Licenses, contracts, and provider enrollments often need to be re-established.
Stock sales: Less frequent. The corporate entity and its liabilities transfer intact.
Mergers: Used in group transactions. More complex, often involving payroll and licensing changes.
The Dental Mergers and Acquisitions Transaction Process
Dental M&A deals typically unfold over 4–8 months and require clear timelines, expert support, and strong communication between both parties. While the process may follow a predictable structure, each deal is shaped by the unique goals, financials, and clinical operations of the practice. Understanding each stage in advance helps sellers avoid delays, protect their valuation, and stay in control of key decisions throughout the transition.
Preliminary assessment: Sellers gather financials, production reports, and staff information; buyers define target criteria, such as location, payer mix, or specialty.
Valuation and non-binding Letter of Intent (LOI): This outlines price, structure (asset or stock), and high-level terms.
Due diligence: Usually spans 30–60 days and covers financials, compliance history, staff contracts, equipment, and clinical workflows.
Financing: May involve bank loans, seller financing, or SBA loans, depending on deal size, buyer profile, and lender appetite.
Closing and transition: Focuses on license transfers, staff onboarding, and patient communication plans to preserve goodwill and minimize disruption.
The Role of Dental Service Organizations in Dental Mergers and Acquisitions
Dental service organizations (DSOs) play a central role in the current wave of consolidation. They offer capital, administrative support, and operational systems while allowing dentists to focus on clinical care, though the level of autonomy can vary by deal structure.
Common DSO partnership models:
Equity partnerships: Dentists retain a minority stake in the practice after the sale.
Management Service Agreements (MSAs): The DSO manages non-clinical operations in exchange for a fee, while ownership remains with the dentist.
Hybrid models: Combine shared ownership and management support.
What DSOs look for:
Strong EBITDA margins
Growth potential (e.g., underutilized hygiene, procedure expansion)
Geographic fit for existing DSO locations
Stable, credentialed staff and low turnover
Opportunity to add specialty services
Benefits and tradeoffs:
Benefits: Centralized HR, billing, marketing, payer negotiation, and access to growth capital.
Risks: Less control over operations, potential culture clashes, and restrictive long-term agreements.
Strategic Considerations for Sellers
Most dental practices lose value during a sale because the owner waited too long to prepare. Buyers are drawn to practices that show clear financial performance, operational consistency, and opportunities for future growth. Treating the years before your exit as a ramp-up period, rather than a wind-down, can significantly increase your valuation and leverage in negotiations.
Start early: Begin planning two to three years before your intended sale date to strengthen your financial and operational position.
Clean up your financials: Buyers look for reliable cash flow, low overhead, and consistent revenue. Accurate, organized books build confidence.
Standardize operations: Create systems that don’t rely on you personally. This makes the transition smoother and your practice more appealing.
Invest in upgrades: Replace outdated equipment and modernize your space where needed to avoid giving buyers a reason to negotiate down.
Highlight growth potential: Document underutilized opportunities like unused chair time, low hygiene recall rates, or adding specialty services.
Show a stable patient base: Demonstrate active patient retention and consider implementing a dental membership plan to highlight recurring revenue.
Build your online presence: Positive reviews, good search visibility, and a strong reputation signal long-term practice viability.
Know your ideal buyer: Individual dentists may offer more flexibility, while DSOs usually bring more capital but demand structure and longer commitments.
Plan for the financial side: Work with a dental-savvy advisor to navigate tax planning and retirement, so you walk away with what you need.
Strategic Considerations for Buyers
Buying a dental practice requires a clear plan. Know what you’re looking for in terms of location, services, patient mix, and staff culture. Define financial targets before you begin your search.
Use dental brokers, outreach, and your professional network to find practices. Consolidation is growing fastest in large cities where patient demand and hiring pools are stronger.
Explore financing options early. SBA loans require more paperwork but offer long terms. Conventional loans move faster but may need stronger credit. Seller financing can help close valuation gaps or ease the transition.
Once the deal closes, integration becomes the priority. Retain staff, communicate with patients, and align systems and processes. A smooth first few months helps protect revenue and keep the team stable.
Make Smart Staffing Moves during Dental Mergers and Acquisitions
Dental mergers and acquisitions are changing the way the industry works, from how practices grow to how dentists plan their exit strategies. Whether you're thinking about selling, looking to expand, or just curious about what’s next, understanding the ins and outs of M&A can give you a serious edge. From financial prep to cultural fit, it all matters.
One piece that’s easy to overlook during a transition? Your team. Keeping the right people in place, or finding great new ones, can make all the difference. If you’re facing staffing gaps during a merger or just need an extra hand, Teero makes it simple to connect with qualified dental professionals when you need them most.
Check out how Teero can help your practice, no matter what stage of the journey you're in.