Several trends and events that have taken place recently could have a positive effect on the DSO field this year.
Here are two pieces of good news for DSO leaders to know:
Positive M&A outlook
After experiencing slower growth in the last year, DSOs are preparing to make bigger moves in the latter half of 2024 thanks to a brighter outlook on the economy.
Some DSOs began shifting expansion strategies earlier this year and focusing on other areas of growth to wait out ongoing economic challenges, including inflated supply costs and higher costs of capital. Richard Hall, CEO of USOSM told Becker's in February that macroeconomic conditions were one of the biggest challenges facing DSOs, predicting these conditions would continue until the second half of 2024.
This year, many DSOs have gained new capital to fuel future growth. While the amounts in these recent deals vary, at least three DSOs have earned more than $100 million: Allied OMS, which secured a $116 million credit facility, The Smilist, which closed on a $285 million debt facility, and Gen4 Dental Partners, which received a $315 million credit facility.
These companies plan to use these additional resources to fund both organic and inorganic growth opportunities, including network expansions and adding services.
Henry Moomaw, CFO at Irving, Texas-based U.S. Oral Surgery Management, said these new investment deals could be a sign that DSOs are gearing up for a more active market.
"The general expectation now is that you'll start seeing reductions in interest rates later in the year, and that may just generally square the economy and boost the capital markets as well. You may see more deals on the sale side from DSOs, some combinations may happen as well," he said. "We certainly believe the general M&A market resurgence will also pick up. Historically, the last half of the year is much more vibrant from an M&A perspective than the first half of the year. [More than] 60% of our deals in a year are done in the latter half of the year versus the first half of each year."
Technology
DSOs have continued to add new technology to their networks to support doctors and enhance patient care.
Dental Care Alliance recently became the first large-scale DSO to launch guided biofilm therapy to its network. The DSO partnered with EMS Dental, a manufacturer of GBT devices, and will add its technology to its 400-practice network.
Heartland Dental and VideaHealth also completed the largest dental AI rollout in history this year after the DSO added VideaHealth's technology to its network of more than 1,700 practices.
Tim Quirt, DDS, senior vice president of clinical operations for Heartland Dental, told Becker's the new technology has helped improve patient education and treatment acceptance.
"That's one of the greatest things AI has enabled our supported doctors to do — reinforce their diagnostic philosophy and accuracy while enhancing patient case acceptance. It's not necessarily about trying to make a doctor feel bad that they potentially might have missed something in the past," he said. "Ultimately, are we giving our patients the best care we possibly can? This is just light years ahead of anything we've had in the past. Yes, you will find areas that you potentially would've missed in the past, but what you're also doing is being able to communicate with a patient any type of issue they may or may not have very clearly that they're now saying, "I see it, and yes, I should take action on that," and that's one of the best things."