An evolution of thoughts towards DSOs...

Over the past couple of years, I have been lucky to spend a lot of time with my father.  We have been brought together as a family for celebrations and memorials (sadly) over the years.  Each time we get together, he asks me about the ever-changing landscape in the DSO M&A markets.  You see, my father is a pediatric dentist.  He started his practice in 1976, grew the practice to a multi-doctor single location, saw 100+ children a day in the summertime, and ultimately sold his practice to his associate about 7 years ago.  Over the course of my 14-year career in the business of dentistry, my father and I have always talked shop. 

3 Reasons to Sell Your Large Practice or Group Today

(or wait 4+ years to attain the same after-tax benefit)

When demand exceeds supply, prices go up. Today, demand from DSOs and Private Equity Groups (PEGs) far exceeds supply for dental practices and dental groups.  On all deals we have taken to market in 2021, we have noticed a remarkable phenomenon: we have more aggressive bidders than ever (more than 2019) and higher offers than we ever thought attainable.  Below are some real examples of what our clients are experiencing:

2020 M&A Year In Review

As 2019 ended, the M&A markets in the DSO markets were white hot.  Every deal that we took to market enjoyed multiple bids and our clients were continually awarded extremely lucrative valuations for their businesses.  The buy-side was voracious: there were more buyers than ever and new ones appearing every day willing to pay more and more to enter the DSO space.  The debt markets were strong, the money was cheap, and lenders were clamoring for deals.  It was truly a sellers’ market and the valuations kept creeping higher and higher.

Internally, our plan was to scale the business as we were picking up more and more mandates on the sell-side and saw an ever-deepening pool of investors and buyers.

“Everyone has a plan until they get punched in the mouth”

Mike Tyson

Top 3 (not so) Obvious Reasons to Engage TUSK as Your Sell-Side Advisor

As you all know by now, there are more buyers for dental practices in the market than ever before. Additionally, the value of your practice or group is likely as high as it ever has been (and ever will be). And finally, it would shock me if anyone who is reading this blog (and owns a group or large practice) has NOT received an unsolicited offer from a buyer.

Dad’s Story...

Around 2008, my father, Dr. Ben Cumbus, a pediatric dentist from Montgomery, AL, was looking to sell a portion of his practice to an associate. Leading up to that decision to sell, my father worked diligently as a solo doctor each week for over 30 years to serve our city’s children to meet their oral healthcare needs. Although the practice had a humble beginning in a small office park, he moved the business to its permanent location in a beautiful standalone building with a caboose on the front that served as a waiting room for the kids. Over the years, his team and business grew, and the practice (and the caboose) became a bit of an icon in the city.

Whew – what a year! 2019 was a whirlwind of activity at TUSK and in the DSO economy. We saw a significant amount of change, growth, M&A activity and new entrants into the market that it is hard to keep track of. Before we dive into 2019, let’s reflect on how the year started by looking at how 2018 ended:

- We saw transformational growth of some of the enterprise level DSOs including Heartland and Pacific Dental both adding 100 practices or more and NADG growing the number of affiliated practices by 49% in just one years’ time.  New doctor-founded, debt-funded groups were popping up on our radar regularly.

- Attendance at almost all DSO conferences were up big – interest in the space was growing.

- We were getting a call from a new Private Equity Group interested in the DSO space a couple of times a month.

- At TUSK, we sold more practices than ever before, across all specialties at multiples well above our client’s (and frankly our expectations) and worked with well over 70 groups to help them START, GROW or SELL their practice or group.

We are pleased to announce that TUSK Partners was named as one of Axial's Top 25 Lower Middle Market Healthcare M&A  Advisors in 2019.  TUSK Partners is one of the most active M&A Advisors in the Dental Economy and works with dentists, Group Practices and DSOs nationwide.  Today, TUSK Partners represents over $250 million of transactions and continues to see the pipeline grow.  Kevin Cumbus, President | Co-Founder & Managing Director of the M&A Advisory business shared:

"2019 has been a remarkable year for TUSK Partners and all of our clients.  We have been able to achieve exits for our clients that far exceed their expectations and aided in the creation of wonderful partnerships among our clients and buyers in the market.  I am most satisfied with the work we have accomplished with clients who come to us after they have received unsolicited offers from the buy-side.  In every one of these situations, we have been able to bring more buyers to the table, provide our clients better buy-side choices, and driven up the price of their business by an average of 35% and in once case, 56%.  There is no better time to own or sell a practice or group than today." 

I have been in the business of valuing and selling dental practices since 2007. Over that time a lot has changed. 

In 2007, I joined well-established dental practice valuation and transition company. We worked exclusively with dentists to help them establish a value for their business for the purposes of either a 100% sale or for a buy-in from the associate or future partner. Our valuation process was always the same. We would request a stack of documents, including tax returns, P&Ls, historical production and collections reports, and payer by source reports. In return our client would mail us 7-11 inches of paper to wade through. We would pour all of this data into a financial model and turn it into information. Next, we would work with the doctor to establish the net income from the business then perform 7 intricate valuations methodologies and weigh each one based on various qualitative aspects of the business. It was a thorough and rigorous process that took days to complete.

Bringing Wisdom To Leadership.

We at TUSK are lucky to call Dr. Marc Cooper not only a colleague but a true friend. Over the years, Marc has been a vital resource to my personal journey as an entrepreneur and to TUSK Partners. I credit Marc for guiding us early on and propelling our company into the DSO universe by inviting us to join him on the stage in 2017 at the ADSO. It was the first step in a long journey for TUSK, and I will always be grateful for his kindness.

From Fraud and Failure to Double-Digit Exit Multiples, Dykema Reminds Us All How Far the DSO Economy Has Come in Recent Decades.

Those who braved the summer heat of New Orleans to attend Dykema’s 4^th Annual Definitive Conference for DSOs earlier this month left well informed about our ever-changing DSO economy. 

Brian A. Colao (Director of Dykema’s DSO Industry Group, and his industry leading team hosted over 400 attendees to a 2-day information-packed survey of the DSO market.  This conference had a markedly different feel than most that we have attended this year – it had both a reflective perspective from Colao reminding the audience how the DSO economy has evolved in recent decades as well as the feel of a Survey Class of the current market with profiles of 2 of the largest names in the space: Craig Abramowitz (co-CEO of Dental Care Alliance) and Dr. Sulman Ahmed (Founder and CEO of Deca Dental).