If you are a dentist that has 20% or more of your revenue attributable to implants, and over $1.5M in revenue you have one of the most valuable practices in America today. This was not the case, a year ago…
20 years ago, when the consolidation of the dental industry was in its infancy, almost all the investors were focused on buying general practices. They were plentiful, in great locations, and each year many new dentists graduated from school to join these practices as Associates. Additionally, GP practices had recurring revenue through their hygiene department. Hygiene regularly represented 20%+ of revenue. It helped de-risk the cashflows and the dependency on the dentists.
The combination of a recurring revenue aspect and de-risked cash flows (the less risky the cash flows, the more valuable a business) proved to be highly attractive for investors, leading them to begin buying GP dental practices. Soon, the buyers were everywhere. Many of the great businesses had already sold and it became harder to get a return on investment due to rising valuations (more demand + less supply = higher prices).
A Move To Specialty Dentistry
Soon, savvy investors began looking to alternatives in dental investing. This led them to begin to build DSOs in pediatrics, orthodontics, and recently oral surgery and endodontics. At one point in time, these specialties were considered too risky to invest in due to the key-man risk. Specialty practices are, in many cases, heavily dependent on referrals from other providers. And if the specialist were to exit, those referrals could dry up. Investors slowly got comfortable with this key-man risk through post-sale employment obligations and the race was on. In the last 3 years, Oral Surgery and Endodontic practices, once completely ignored by DSOs, became some of the most sought-after businesses, and as a result, traded at some of the highest multiples we have ever seen. Consolidation in the specialty space has been swift! It is estimated the orthodontic, oral surgery and endodontic practices are more consolidated than GP practices today. Before this wave occurred, we know of many specialists, who at the end of their career, simply locked their doors and walked away from their business. But in the last 3 years, the specialists that we have worked with have received 300 – 500% of collections for their business. My how the times have changed!
Investors are always looking for the next great thing. You see it all the time. Investors flocked to Facebook when it was hot, then to Tesla, and do you remember the pop in the shares of Zoom during the pandemic? Now investors are looking for ways to capitalize on the giant strides in Artificial Intelligence (“AI”). So, what is the next BIG THING in dental?
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There Is A New Darling For Investors: Implant Dentistry
In recent months, investors have begun to discover the value of practices focused on implant dentistry. Private Equity Groups and newly formed IDSO/ DSOs began calling our offices about this in Q3 of 2022. They expressed an interest in any implant-specific business and any practices that have at least 20% of their revenue attributable to implants. There are new buyers each week looking to invest in these businesses, and they are all willing to pay a premium to enter the market. Since late last year, implant focused practices have sold well above the average GP practice and we anticipate that to continue well through 2024.
If you own or are building an implant driven business, it has never been more valuable. Doctors who aligned with DSOs early in Orthodontics, Oral Surgery and Endodontics have already enjoyed the monetization of their equity. This wave is here today for implant dentistry.
There's Still Time But It Won't Last Forever
Implant driven business are receiving some of the highest valuations we have ever seen at TUSK. While there is still time to act on this valuation hike, the clock is ticking, and you do not want to wait until it’s too late. One of the most important and easiest things a dental practice owner can do is find out the true value of their business. We talk with hundreds of doctors every year and conduct a complimentary no-obligation practice valuation for their business. Our team can provide insight on how your overall practice value could be impacted in a sale if you choose to act sooner than later. We would be happy to do the same for you, it’s a quick and easy process, but it allows you to know where you’re at when it comes to the health and future of your dental practice.
Would You Like To Explore Your Options In Today's Marketplace?
About TUSK Partners: TUSK Partners (“TUSK”) provides M&A Advisory services in the dental industry. TUSK has completed over $950M of transactions across all specialties. With an in-depth understanding of the marketplace and access to 100’s of buyers nationwide, we help our clients confidently pursue M&A transactions that maximize their long-term value. With our significant collective experience of over 40+ years of dental practice transactions, we offer our clients solutions that help them achieve their strategic and financial objectives. For more information, visit https://tusk-partners.com