Consolidation in the dental industry has shown no signs of slowing.
Here are three dental leaders' insights on current consolidation trends:
Editor's note: Responses were edited lightly for clarity and brevity.
Michael Schwartz. Chair and CEO of Specialty Dental Brands: When that pandemic started driving and places were [shut down] for two, three, four months, the consolidation picked up. [Specialty Dental Brands] is one of those stories, especially in the specialty area of dentistry. [Specialty Dental Brands saw] tremendous growth from 2020 and 2021 during the pandemic; we actually saw our patient volumes go up. Then our partnerships went up tremendously, [it finally hit doctors]. There's too much administrative stuff. How do you do a [Paycheck Protection Program] loan? How do you do an idle loan? How do I take care of these benefits? How do I comply with Colorado's emergency COVID sick pay leave act? It just overwhelmed a lot of dentists. I think that event has propelled a lot of dentists to relook at their plans and say, maybe it is good to partner with a group that has the expertise in legal and marketing and finance and all the things that they weren't trained to do in school.
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Andrew Smith. Executive Director at the Association of Dental Support Organizations: I think what's really intriguing is that DSOs are in growth mode. Dentistry remains one of the fastest-growing industries in healthcare. We see this time and time again that the pie in the oral healthcare marketplace continues to get bigger. DSOs probably will triple in size over the next 10 to 15 years, and we are seeing a ton of consolidation coming out of COVID-19. A lot of our member companies are growing either through affiliation or acquisition, but also are growing through a de novo process. I think it's continuing to get bigger and better, and it really showcases where oral healthcare is growing.
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Elliot Zibel. CEO and Co-founder of Select Dental Management: I think what we're starting to see is consolidation amongst bigger groups and smaller groups. Traditionally, you've seen the DSOs kind of growing and taking share. Mid-Atlantic and Western Dental combined, and now they're 500 plus practices. I think we're going to start to see more of that type of consolidation, because it's harder to move the needle for these bigger groups and to drive growth. There is substantial cost energy that makes it very financially attractive for some of these partnerships to happen.
If that happens, the other trend you're going to see is not just consolidation amongst bigger groups but regional DSOs being acquired by some of these larger groups. I think they're going to be able to pay higher valuation multiples based on synergies.
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