Mergers and acquisitions were a huge part of the dental and DSO space in 2023, but changing economic conditions have raised uncertainty in the industry.
In 2023, dentistry had the most mergers and acquisitions when compared to 13 other medical specialties, according to a report from VMG Health. Deals in the dental space were far and away the most active, with there being more than three times the number of deals in dentistry than the second highest specialty.
According to the report, the deal volume in dentistry was 180. Eye care and internal medicine were the only other specialties to record more than 40.
At the start of 2024, there was uncertainty among dentists and DSO executives about how the year would play out, in part due to cost of capital being much more expensive in years past.
"I think the biggest challenge facing DSOs and MSOs is the macroeconomic conditions with the cost of capital more than doubling over the last 18 to 24 months," Richard Hall, president and CEO of USOSM told Becker's in February. "[M]any DSOs and MSOs are in a position where they just can't get the debt they need to continue to fund their growth."
However, for the largest DSOs and groups that have greater access to funding and capital, one CEO predicted that groups with that advantage would still be active.
"For large DSOs that are adequately funded through private equity or other sources of cash, there will be significant opportunities to continue buying existing practices or start de novo practices," Richard Huot, DDS, CEO of Beachside Dental Consultants, said to Becker's in January.
As the year has unfolded, industry leaders have gained a greater grasp on how the economic conditions will impact the acquisition side of dentistry, with executives looking forward to a strong future.
"We're likely going to stay at the plateau stage for another 12-18 months, but the end of the year could be the beginning of the end for that," Haim Haviv, founder and CEO of Hudson Dental, said in July. "We're closely tracking inflation as a lead indicator to potential interest rates easing, which is a tailwind for any M&A activity."
"I expect the 2024 first half pace to be sustained during the second half of the year as the economy continues to be strong, DSOs again access debt capital and interest rates potentially begin to decline," David Sopp, senior vice president of corporate development at First Choice Dental, told Becker's.
At one point, 2024 seemed to be potentially a slower year in the dental mergers and acquisitions arena that has instead built upon high activity from previous years, with full steam ahead in the second half of the year.