Dental practice sales, including those to individual dentists and larger groups and DSOs, are shaped by market patterns and shifts, including the type of practice, location, interest rates.
Professional Transition Strategies, a mergers and acquisitions company for dental practices, recently launched Headwaters Practice Transitions for dentist to dentist sales.
Kyle Francis, founder and president of Professional Transition Strategies, recently connected with Becker's to discuss the new company, differences between dentist buyers and group buyers and practice sales trends.
Note: Responses were lightly edited for clarity and length.
Question: What was behind the decision to launch Headwater Practice Transitions and how does it differ from Professional Transition Strategies?
Kyle Francis: I originally started out this company as a Headwaters Practice consultant working with all types of practices, large, small and all specialties. Over the course of time, I had bought a few other mergers and acquisitions companies, and we decided to implement the brand name of Professional Transition Strategies, and began working with more robust practices. As we built the company over time, what we found was that there was a shortfall in the ability of helping the more standard or smaller practices out in the same way that we were able to help out these larger practices.
In 2023, we ended up telling around 240 practices that we couldn't work with them just based on size criteria. As we started to look at that, we said, 'You know what? That's kind of silly. We're pretty darn good at this whole transition thing, and we sell quite a few practices to individuals, so why not apply those learnings to smaller practices.' We decided to start up Headwaters as a brand name again to be able to help out those practices. Headwaters specializes in doctor to doctor transitions and helping these doctors be able to get that first step towards an amazing career.
Q: What are some of the differences between selling to another dentist and selling to a DSO or dental group?
KF: In some ways they're much more simple, and other ways they're way more complicated. The simple side is that you don't have to worry about the type of transaction because the type of transaction is going to be very formulaic. I would say the challenging part is going to be that many of these buyers are first time buyers, and whenever you have a first time buyer, there's a lot of questions that come up. And so, you know, rather than just looking at it from the seller's perspective, we have to keep that, you know, independent buyers hat on as well, which is going to be we want to make sure they understand what they're getting into.
A lot of that has to do with the question of can they handle the type of production that the doctor is currently doing out of the practice? Do they understand what revenue per patient is going to look like? Do they understand the total amount of hours, not just clinical hours, but also running the business hours that things are going to be looking like? What is the overall opportunity as well? I would say it's a more educational role that we end up taking in that type of practice transition. A lot of the squishy stuff ends up becoming very, very important in transitions like that.
Q: What are some trends you are seeing in dental practice sales?
KF: One is that there is a difference between the different specialties in terms of the time horizon that you can expect to sell within. General practice definitely has the most activity. Part of it is just because of the total amount of general practices in comparison to the total number of specialists. Some specialties, like periodontics or prosthodontics practices, are harder to sell to an individual because there are simply much fewer buyers out there than there are sellers. That doesn't mean it's not going to sell, but it does often take longer.
I would also say that the location definitely matters. Larger, more robust cities end up having more activity than very small towns. It's not just the dentist that you're needing to convince that this is going to be a good situation for them. It's also the family and the spouse. And many times they're very used to living in a larger city, it's a big change for them to go to a smaller town, even though many of the great opportunities end up being small towns. I would also say I've only seen the total amount of practices expand. There have been so many people that have come out and decided, OK, now is the right time. Part of that is going to be that maybe they waited a little bit longer than they should have coming out of the 2009 recession, and then suddenly COVID hit. Now, many just don't want to have to go through something like this again.
Obviously interest rates definitely do matter, and that, what we find is they do matter a lot more to individual buyers than in the group buyer setting. If you're taking a certain amount of money out, and now that has to be allocated to your mortgage, and then also the purchase of your practice, suddenly there's just not as many dollars. Just waiting for interest rates doesn't seem like the best strategic choice to me, in total, but we do see it have an impact for sure. Those are a few of the biggest trends that I'm seeing.