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Healthcare M&A Market: Q1 2026 Update · The Advisor's Table

• 0:01
  SPEAKER_00: Take a seat.
• 0:02
  SPEAKER_00: You're at the Advisors Table.
• 0:03
  SPEAKER_00: I'm Brian Christensen and I'm Michael Jarve.
• 0:06
  SPEAKER_00: We're proven MA professionals at Seven Pillars, a transition advisory firm that is here to help break down the complexities of healthcare and business transitions so you can move forward with confidence.
• 0:18
  SPEAKER_01: Welcome back to the Advisors Table.
• 0:20
  SPEAKER_01: Today we are introducing a three-part series to discuss the broader MA landscape.
• 0:25
  SPEAKER_01: Part one, which we will cover today, will be around the dental MA space and what's going on in dentistry.
• 0:30
  SPEAKER_01: If that's not for you, stay tuned.
• 0:32
  SPEAKER_01: Our next episodes will cover other provider-led businesses, such as veterinary, eye care, med spa, dermatology, et cetera.
• 0:41
  SPEAKER_01: And then finally, we'll wrap up the series with healthcare businesses at large.
• 0:45
  SPEAKER_01: These are businesses that serve veterinary practices, dental practices, et cetera.
• 0:50
  SPEAKER_01: But first, before we get into that, Michael, new year, new Michael, any big resolutions this year?
• 0:56
  SPEAKER_00: Lots and lots of big New Year's resolutions.
• 0:59
  SPEAKER_00: Um my number one goal is to be 1% cooler than my co-host Brian Christensen each and every day.
• 1:05
  SPEAKER_00: I think it's pretty achievable, don't you?
• 1:07
  SPEAKER_00: Absolutely.
• 1:08
  SPEAKER_00: Already done.
• 1:09
  SPEAKER_00: Right.
• 1:09
  SPEAKER_00: According to the team, they would all say that's an unachievable goal, unattainable.
• 1:13
  SPEAKER_00: Probably shouldn't make that your motivation.
• 1:15
  SPEAKER_00: But I'm not really a big goal guy.
• 1:16
  SPEAKER_00: You know, I'm more of just I try to be better every day, and I don't like to use the new year as like this is my goal setting season.
• 1:23
  SPEAKER_00: I just try to set goals all throughout the year and continually be better, both for my family, my profession, um, and everything in between.
• 1:29
  SPEAKER_00: But Brian, I think you're a pretty big goal guy.
• 1:31
  SPEAKER_00: What do you got going on?
• 1:32
  SPEAKER_01: Yeah, yeah.
• 1:33
  SPEAKER_01: I mean, a few resolutions um is uh one, read more books than last year.
• 1:40
  SPEAKER_01: Always good.
• 1:40
  SPEAKER_01: Yeah.
• 1:41
  SPEAKER_01: Maybe try uh to get one book done a month.
• 1:44
  SPEAKER_01: So how many did you do last year?
• 1:46
  SPEAKER_01: Eight.
• 1:46
  SPEAKER_00: What eight pretty good goal.
• 1:48
  SPEAKER_00: Yeah.
• 1:48
  SPEAKER_00: So this year we'd like to get 12.
• 1:50
  SPEAKER_00: Are we a fiction guy, nonfiction guy?
• 1:52
  SPEAKER_00: Do we like business books?
• 1:54
  SPEAKER_00: What would we like to read?
• 1:55
  SPEAKER_00: Nonfiction, 100%.
• 1:56
  SPEAKER_00: I cannot do fiction.
• 1:58
  SPEAKER_00: Not surprised.
• 1:58
  SPEAKER_00: Not surprised at all.
• 1:59
  SPEAKER_00: I'm more of a fiction guy.
• 2:00
  SPEAKER_00: There you go.
• 2:02
  SPEAKER_00: There you go.
• 2:03
  SPEAKER_00: All right, what else we got?
• 2:04
  SPEAKER_01: Run a half marathon by the end of the year.
• 2:07
  SPEAKER_01: Wow.
• 2:07
  SPEAKER_01: Yeah, okay.
• 2:08
  SPEAKER_01: Okay, what does this look like?
• 2:09
  SPEAKER_01: How do we get there?
• 2:11
  SPEAKER_01: Run 13.1 miles by December 31st of 2026.
• 2:14
  SPEAKER_00: Have we started training, sir?
• 2:16
  SPEAKER_01: Uh a little bit.
• 2:17
  SPEAKER_01: I mean, you know, just couch, couch to half marathon, no big deal.
• 2:21
  SPEAKER_01: It's easy.
• 2:21
  SPEAKER_01: Come on, we got that.
• 2:22
  SPEAKER_01: We can do that.
• 2:23
  SPEAKER_01: It's in our bag.
• 2:23
  SPEAKER_00: Yeah.
• 2:24
  SPEAKER_00: Okay, so this half marathon, is this going to be done at the Dallas Marathon?
• 2:28
  SPEAKER_01: I don't know.
• 2:28
  SPEAKER_01: You know, that's it's kind of cold at the end of the year.
• 2:31
  SPEAKER_01: It's in December.
• 2:32
  SPEAKER_01: So, you know, maybe do it, you know, in the fall.
• 2:34
  SPEAKER_01: Yeah.
• 2:34
  SPEAKER_00: Well, you'll have to let us know so that way all of our listeners can show up and cheer you on, man.
• 2:38
  SPEAKER_00: Like we want to see somebody hauling down the half marathon trail at a 10-minute pace.
• 2:42
  SPEAKER_00: That's brisk, dude.
• 2:42
  SPEAKER_00: Come on.
• 2:43
  SPEAKER_01: Listeners from around the country come and hold signs for my half marathon.
• 2:47
  SPEAKER_00: Absolutely.
• 2:48
  SPEAKER_00: There you go.
• 2:48
  SPEAKER_00: All right.
• 2:48
  SPEAKER_00: Well, enough about those New Year's resolutions.
• 2:50
  SPEAKER_00: Brian, those are some really, really interesting resolutions.
• 2:53
  SPEAKER_00: Probably pretty vanilla like you, but that's fine.
• 2:55
  SPEAKER_00: Um, with that being said, let's jump into the state of the dental MA market.
• 3:00
  SPEAKER_00: You know, general practices are definitely the most widespread.
• 3:04
  SPEAKER_00: There's the most GPs in the country, probably the most DSOs out there that acquire GPs.
• 3:09
  SPEAKER_00: Give us a little state of the state of the GP market, where things are going.
• 3:12
  SPEAKER_00: Touch on that a little bit for us, Brian.
• 3:14
  SPEAKER_01: Yeah, it's a great question, Michael.
• 3:15
  SPEAKER_01: And I think that's a great place to start.
• 3:18
  SPEAKER_01: Um, so this was where, you know, the DSO movement started in the GP space, you know, with the Heartland dentals of the world.
• 3:24
  SPEAKER_01: I think the the space is still consolidating.
• 3:26
  SPEAKER_01: You know, it's probably 20 or 25% consolidated.
• 3:29
  SPEAKER_01: I don't think it'll ever get to a hundred percent uh consolidated.
• 3:32
  SPEAKER_00: But let's let's let's double click on that real quick because this is probably a good moment for us to teach our listeners something.
• 3:37
  SPEAKER_00: Why do you think it will never get to a hundred percent consolidation?
• 3:40
  SPEAKER_01: Yeah, I mean, I just don't think that every practice is the has the right makeup and size um or location to be interesting for a DSO.
• 3:49
  SPEAKER_00: Yeah.
• 3:50
  SPEAKER_00: Right.
• 3:50
  SPEAKER_01: I mean, it's not big enough or it's too remote to recruit a next provider, or the or the provider or owner doesn't want to partner with the DSO.
• 3:58
  SPEAKER_01: And so um I I think you know the space will continue consolidating.
• 4:02
  SPEAKER_01: It'll probably get to 50% roughly, but um, I don't think it'll ever get to a hundred percent.
• 4:07
  SPEAKER_00: Right.
• 4:07
  SPEAKER_00: And and I think we say this all the time in in any provider-led business, not just dentistry, right?
• 4:12
  SPEAKER_00: Private practice is not dead.
• 4:13
  SPEAKER_00: Right.
• 4:13
  SPEAKER_00: You know, there will always be transitions from doctor to doctor because there's people that just philosophically disagree.
• 4:18
  SPEAKER_00: And and back to your point.
• 4:19
  SPEAKER_00: So, like we think that they're gonna operate side by side, right?
• 4:22
  SPEAKER_00: Like the MA market, the DSO market's gonna operate side by side with the private practice dentistry, but not to interrupt you, keep going on your update.
• 4:29
  SPEAKER_01: Yeah, I mean, you know, as you look at the 300 or so DSOs out there, the majority of them are actually GP DSOs, right?
• 4:36
  SPEAKER_01: Um, where they acquire uh general practices and a certain geography, whether it's the southeast or the northeast or Texas or the Mountain West or whatever, um, there's very few of these GP based DSOs that are nationwide, right?
• 4:48
  SPEAKER_01: There's only a handful of them that, you know, we can talk about that um are nationwide, your MB2s, your heartlands of the world, but everyone else is pretty regionally focused on a handful of states or a region specifically.
• 4:59
  SPEAKER_01: Um, one thing we're starting to see right now um in the DSO, the GP DSO space is actually consolidation of consolidators.
• 5:07
  SPEAKER_01: Yeah.
• 5:08
  SPEAKER_01: Right.
• 5:08
  SPEAKER_01: We saw that with Heartland Dental um late last year and 2025 with the SMILE design.
• 5:13
  SPEAKER_01: So they acquired SMILE Design and you know, SMILE Design was 50, 60 locations.
• 5:17
  SPEAKER_01: They brought that under their fold, um, which was a which was you know a pretty big deal in the GP uh DSO space.
• 5:23
  SPEAKER_01: But uh as far as for you know, what is my practice, what does that look like?
• 5:27
  SPEAKER_01: Um, you know, they're really, you know, as you evaluate DSO options first, where are you located?
• 5:32
  SPEAKER_01: Right, that's gonna depend a lot on the buyer makeup.
• 5:35
  SPEAKER_01: What's the size, right?
• 5:36
  SPEAKER_01: Um, how long do you want to continue working?
• 5:39
  SPEAKER_01: What is your payer mix, right?
• 5:41
  SPEAKER_01: Uh speaking of geography, can they recruit more providers or your replacement one day?
• 5:46
  SPEAKER_01: Or do they perceive they can recruit more buyers?
• 5:48
  SPEAKER_01: You know, it's that's very challenging.
• 5:50
  SPEAKER_01: Right.
• 5:50
  SPEAKER_01: And and you know, what's your hygiene program doing?
• 5:52
  SPEAKER_01: Is it very profitable or is it all doctor production?
• 5:55
  SPEAKER_01: Um are you sending specialty out?
• 5:57
  SPEAKER_01: Are you bringing that in-house?
• 5:58
  SPEAKER_01: You know, all of those things buyers will look at as they evaluate opportunities.
• 6:02
  SPEAKER_00: Yeah, so I guess kind of like to summarize what you're effectively saying is like buyers are looking at what are my growth opportunities.
• 6:09
  SPEAKER_00: If I believe there's good growth opportunities in this practice, I feel pretty confident about making that investment.
• 6:15
  SPEAKER_00: Am I summarizing that correctly?
• 6:16
  SPEAKER_00: Absolutely.
• 6:17
  SPEAKER_00: Okay, great.
• 6:17
  SPEAKER_00: Yeah, no, and and are we still seeing buying happening?
• 6:20
  SPEAKER_00: Are GPs still getting bought at still kind of those record paces, or has it slowed down a bunch?
• 6:24
  SPEAKER_00: What are you seeing there?
• 6:25
  SPEAKER_00: It's still very active.
• 6:27
  SPEAKER_00: It's a very active mark, active marketplace.
• 6:28
  SPEAKER_01: They're looking for quality practices with quality growth opportunities that you said, because these buyers, they have to buy a practice and make an investment and then make it better, right?
• 6:37
  SPEAKER_01: You know, the idea of just buying a practice and, you know, leaving it on an island and let them continue doing what they're doing, that's that's just not gonna happen anymore.
• 6:45
  SPEAKER_00: Yeah, absolutely.
• 6:46
  SPEAKER_00: And it's still, I mean, it doesn't seem to be slowing down for us over here at Seven Pillars and you know, good practice still being bought.
• 6:52
  SPEAKER_00: So that's exciting and it's and it's an exciting time for you as a listener if you're an owner of a business, because there's still options out there, right?
• 6:58
  SPEAKER_00: It doesn't mean it's the right option, but there are options out there.
• 7:00
  SPEAKER_00: Okay, so going from GP, let's move into oral surgery.
• 7:03
  SPEAKER_00: Oral surgery seems to be very hot right now.
• 7:06
  SPEAKER_00: So tell us a little bit about what you're seeing there.
• 7:08
  SPEAKER_01: Yeah, I mean, if you take a step back and we're gonna talk about several specialties, but if you as you look at the specialty landscape, oral surgery is by far the hottest space right now.
• 7:17
  SPEAKER_01: And it has been for the past few years, and I we don't see that letting up anytime soon.
• 7:22
  SPEAKER_01: And that's for a few reasons.
• 7:23
  SPEAKER_01: You know, one, um, it has a clinical moat around it, if you will.
• 7:27
  SPEAKER_01: So some GPs, um, you know, going back to GPs, some will GPs will do a little bit of oral surgery work, a little bit of implant work or extractions, but they're not gonna do the heavy, intense uh surgery work that a lot of these types of practices will do.
• 7:41
  SPEAKER_01: Um, right.
• 7:41
  SPEAKER_01: They're not gonna handle a gunshot wound or a knife wound.
• 7:44
  SPEAKER_01: You know, that, you know, surgeons can do that in their sleep.
• 7:47
  SPEAKER_01: But as you look at, you know, beyond the clinical moat, they have a very, very good group of high quality DSOs, right?
• 7:55
  SPEAKER_01: I mean, there's just a lot of them.
• 7:57
  SPEAKER_01: They're well capitalized.
• 7:58
  SPEAKER_01: They have very good private equity investors.
• 8:00
  SPEAKER_01: Several of them have already gone through that recap event, which is where they um essentially will current private equity sponsor will trade their equity to the next level private equity sponsor and it creates liquidity for all investors.
• 8:15
  SPEAKER_01: Um, and so they've gone through a recap event once.
• 8:18
  SPEAKER_01: Um, several of them are going up there for a second or third time.
• 8:22
  SPEAKER_01: And so, as far as the buyer cohort, it is the strongest specialty.
• 8:26
  SPEAKER_01: Um, and then you have the supply and demand issue, right?
• 8:29
  SPEAKER_01: Um, with a strong buyer pool, there's a limited supply of quality practices out there.
• 8:34
  SPEAKER_01: You know, so I think whether it's 200, 220, 220 residents coming out of school every year, and there's only about 5,000 total surgeons.
• 8:43
  SPEAKER_01: So as you look at what is going on in this space, that is what is making that specialty the hottest.
• 8:51
  SPEAKER_00: Yeah, I just I see the same thing, right?
• 8:53
  SPEAKER_00: Like you have that complete supply and demand imbalance, right?
• 8:56
  SPEAKER_00: There's like 300-ish DSOs out there, unless you start including in some of the regional ones, practices that own like five practices, or guys that own like five practices.
• 9:05
  SPEAKER_00: And there's like a bunch of them that are OSO or OMS only, right?
• 9:10
  SPEAKER_00: They only buy the oral surgeons.
• 9:11
  SPEAKER_00: Like you said, there's only like 5,000 of them in the country, and there's about 10 to 15 buyers that only buy oral surgery.
• 9:16
  SPEAKER_00: And that doesn't even include all the GP groups that would love to buy an oral surgery practice, or the PETA-ortho OMS groups that would love to buy an oral surgery practice.
• 9:24
  SPEAKER_00: So these guys just kind of have hit the jackpot right now, and it's it's going incredibly well for them.
• 9:28
  SPEAKER_00: What kind of multiples are you seeing in the space right now for them?
• 9:31
  SPEAKER_01: Yeah, for a strong one-doctor practice and a good geography, you're gonna see anywhere between eight to nine times.
• 9:37
  SPEAKER_01: For a multi-doctor practice and a great geography, you're gonna see higher than that.
• 9:41
  SPEAKER_01: Yeah.
• 9:41
  SPEAKER_01: Um, and so, and that goes back to that is the strongest specialty in dentistry, right?
• 9:47
  SPEAKER_01: Because as you said, there's there's these oral surgery only DSOs that are going after them.
• 9:51
  SPEAKER_01: But now we're starting to see these multi-specialty guys go after them that are pedo ortho OMS, right?
• 9:57
  SPEAKER_01: And so they want to continue that continuity of care um and create the whole patient experience in their DSO.
• 10:03
  SPEAKER_01: And so that's what we're kind of seeing in the oral surgery space.
• 10:06
  SPEAKER_01: But speaking of pedo and ortho, Michael, what are we seeing in the pedo space?
• 10:10
  SPEAKER_00: Yeah, it's a great question.
• 10:11
  SPEAKER_00: If we say like OMS is the hottest specialty right now, I would say that pediatric dentistry is the second hottest specialty.
• 10:18
  SPEAKER_00: And the reason for that is private equity has really gotten behind the thesis of lifetime value of a patient, right?
• 10:25
  SPEAKER_00: So, like the way that the private equity groups look at dentistry, they kind of say, hey, pediatric dentists control the out the clinical outcome of that patient at least for 18 years, but generally they can control it even longer than that because a lot of times patients will go see a general dentist or an orthodontist or an oral surgeon based off the recommendation of their pediatric dentist.
• 10:45
  SPEAKER_00: And that has brought more and more private equity buyers into the space at higher valuations.
• 10:51
  SPEAKER_00: Um, so I don't see that technically going away similar to I think what you saw in OMS.
• 10:55
  SPEAKER_00: I think you have a supply and demand imbalance there.
• 10:57
  SPEAKER_00: There's a lot of supply here, but there's also a lot of demand.
• 11:00
  SPEAKER_00: And I think that lifetime value of the patient and controlling that is something that groups are going to be really excited about.
• 11:06
  SPEAKER_00: Now, what's interesting about the pediatric dental dentistry space is there's not really that many buyers that only buy pediatric dentistry.
• 11:14
  SPEAKER_00: There's very few that have the thesis around, I only buy pedo, right?
• 11:18
  SPEAKER_00: And I buy it all across the country.
• 11:20
  SPEAKER_00: Most of the buyers that buy pediatric dental are GP groups that also buy pediatric dentistry, or they're there's something called the dental, like trifecta, if you will.
• 11:30
  SPEAKER_00: It's a it's kind of a buzzword term that's used in the industry.
• 11:33
  SPEAKER_00: And it makes sense, right?
• 11:34
  SPEAKER_00: They're pedo, that then they'll buy the ortho, and then they'll buy the oral surgery.
• 11:37
  SPEAKER_00: And the thought behind that is I'm gonna get the pediatric dentist and then I now control the referral through those other specialty groups.
• 11:44
  SPEAKER_00: And that's been the one that's kind of been building up the acquisition model for the pedo groups around the country.
• 11:50
  SPEAKER_00: Uh, but they're it's still probably more regional than OMS, right?
• 11:53
  SPEAKER_00: You still have groups that'll buy only in the southeast or the west coast rather than in oral surgery, you really don't have the ability to be picky because there's just not enough of them.
• 12:01
  SPEAKER_00: So if a good practice comes up, you just kind of have to buy it where it is.
• 12:04
  SPEAKER_00: We're still seeing more regional networks in the in the uh in the pedo space, and it's actually flowing pretty well and creating some pretty good returns.
• 12:11
  SPEAKER_00: Brian, anything you want to add or think about there?
• 12:13
  SPEAKER_01: Yeah, you know, Michael, you know, we both have kids, and as we think about our families, right?
• 12:18
  SPEAKER_01: Um, you know, if if you you and your wife take your oldest son to a pediatric dentist and it goes well, well, your second and third son are probably gonna go theirs, right?
• 12:27
  SPEAKER_01: Right, and and for the next 10 years.
• 12:29
  SPEAKER_01: And then probably at some point, your wife says, you know what, I could use a little bit of a bis line, right?
• 12:35
  SPEAKER_01: And suddenly that pedo can start doing a little bit of ortho in-house.
• 12:39
  SPEAKER_01: And not only do your wife's some biz line, but you know what, maybe do some early ortho with your kids, right?
• 12:43
  SPEAKER_01: And so they can start bringing some of those specialties in house.
• 12:46
  SPEAKER_01: And you have that 10-year window where you really control the not only the patient, but the family.
• 12:50
  SPEAKER_00: Right.
• 12:51
  SPEAKER_00: And it's interesting, like off that, you know, parents are not gonna be as thoughtful about where they spend their money when it comes to their kids, right?
• 12:58
  SPEAKER_00: And I can give you guys a real world example.
• 12:59
  SPEAKER_00: When my first son was born, he had a pretty major tongue tie that they couldn't take care of at the hospital, right?
• 13:05
  SPEAKER_00: And so we had to have um a pediatric dentist that could do a phonectomy with a laser.
• 13:09
  SPEAKER_00: Um and there was only a couple options in Dallas, and we didn't really know any of the pediatric dentists at the time, but the hospital said, hey, you should go here.
• 13:16
  SPEAKER_00: Um we drove up there, the guy does a phenectomy for our son.
• 13:19
  SPEAKER_00: It was a thousand dollars, and I paid it in cash and walked out, and it took him five minutes, right?
• 13:24
  SPEAKER_00: And obviously, as a new dad, I'm gonna pay whatever it takes to get my kid taken care of, right?
• 13:29
  SPEAKER_00: Just like most parents would, right?
• 13:30
  SPEAKER_00: It's super important to them.
• 13:31
  SPEAKER_00: And so, like, yeah, there's an emotional connection there, and that's stuff that can drive up value, drive up multiples, and drive private equity being even more interested in space.
• 13:41
  SPEAKER_01: Well, Michael, as we look at um surgery and pediatric dentistry and then look to the next specialty, ortho, you know, the way I think about it that we always talk about if I'm in pain, I'll pay whatever I need to pay.
• 13:52
  SPEAKER_01: Yeah.
• 13:53
  SPEAKER_01: Right.
• 13:53
  SPEAKER_01: So that's where the surgery comes in.
• 13:55
  SPEAKER_01: You'll do anything for your kids.
• 13:56
  SPEAKER_01: Yep.
• 13:56
  SPEAKER_01: Right?
• 13:57
  SPEAKER_01: Pediatric dentistry, you know, do anything for your kids.
• 13:59
  SPEAKER_01: So in uncertain economic times, if I'm in pain, go to the surgeon.
• 14:03
  SPEAKER_01: You'll do anything for your kids.
• 14:05
  SPEAKER_01: But then you go to a more discretionary, what's foreseen as a discretionary specialty in ortho.
• 14:10
  SPEAKER_01: Um, and so Michael, talk a little bit about what's going on in ortho right now.
• 14:14
  SPEAKER_00: Yeah, yeah, it's great.
• 14:15
  SPEAKER_00: It's it's uh a very different market than kind of the first really three we talked about, right?
• 14:21
  SPEAKER_00: Because, like Brian said, general dentistry, pediatric dentistry, oral surgery, kind of necessary.
• 14:27
  SPEAKER_00: You're gonna go get those things fixed if your mouth hurts.
• 14:29
  SPEAKER_00: But on the on the flip side, like, well, my teeth aren't straight yet, and I need brace.
• 14:33
  SPEAKER_00: Well, my pocket's a little thin right now.
• 14:36
  SPEAKER_00: I might wait an extra year to go get go get those braces on or get that Invisalign.
• 14:40
  SPEAKER_00: And so what we've seen is orthodontics does ebb and flow a little bit more with market returns than all the other specialties or general dentistry.
• 14:49
  SPEAKER_00: And that's because exactly like I said, you might wait an extra.
• 14:52
  SPEAKER_00: I don't necessarily believe that you shouldn't get braces, but you can live without the braces.
• 14:57
  SPEAKER_00: And so what we've seen is ortho used to be kind of the darling of this whole thing, right?
• 15:02
  SPEAKER_00: Like incredible margins, doctors working three days a week, they have great relationships with their patients.
• 15:07
  SPEAKER_00: Everybody leaves an orthodontic office when they're done, so happy.
• 15:10
  SPEAKER_00: It's one of the best days of everybody's lives.
• 15:11
  SPEAKER_00: I say I never peaked.
• 15:13
  SPEAKER_00: I peaked at really the day I got my brace off.
• 15:15
  SPEAKER_00: And that was a really low peak.
• 15:17
  SPEAKER_00: It's more like a bunny hill, but that's when most people say they would peak, right?
• 15:20
  SPEAKER_00: Is when they get their braces off.
• 15:21
  SPEAKER_00: And so I think everybody should be going to the orthodontist, but unfortunately, because of that, because we're in a little bit of a slower economic environment right now, orthopraxes have been struggling, right?
• 15:31
  SPEAKER_00: And naturally, because orthopraxes have been struggling, the OSOs and the DSOs that have been heavily acquiring orthopraxes are also struggling.
• 15:39
  SPEAKER_00: And it's really kind of been unfortunately kind of the brake pedals of the whole space.
• 15:44
  SPEAKER_00: What we're seeing is the there's a couple OSOs that are just kind of dominating everything.
• 15:48
  SPEAKER_00: Um, but unfortunately, they're still pretty regional.
• 15:51
  SPEAKER_00: And so they're not really buying all over the country.
• 15:54
  SPEAKER_00: And so there's certain parts of the country that still have a significant amount of great doctors that are not being acquired because there's nobody out there to really buy them.
• 16:01
  SPEAKER_00: Um so all that say, very regional, um high density specifically in kind of the southeast and northeast.
• 16:07
  SPEAKER_00: Um, but then when you get west of the Rockies, it's kind of a barren wasteland over there, and there's not many buyers that are willing to go buy a strong orthodontic practice out there.
• 16:15
  SPEAKER_00: Um so all that's say, you know, if you guys want to hear more about that, you can certainly contact us at Seven Pillars and we can talk you through that.
• 16:21
  SPEAKER_00: But Ortho's definitely been a little bit of a different market environment than um kind of what we saw.
• 16:26
  SPEAKER_00: Brian, anything you want to add?
• 16:28
  SPEAKER_01: Yeah, the only thing I'd add there is, you know, I used to work in an OSO and and that's when this uncertain economic time started.
• 16:34
  SPEAKER_01: And one thing we always looked at is tell us about your patient population.
• 16:38
  SPEAKER_01: So for instance, if your patient population was heavy adults, yeah, good point.
• 16:42
  SPEAKER_01: Okay, um, most likely this is very discretion discretionary.
• 16:46
  SPEAKER_01: So if this local economy gets hit hard, you know, most likely this practice may struggle.
• 16:50
  SPEAKER_01: If it's a heavy kid population, you're probably good, right?
• 16:54
  SPEAKER_01: Because we it goes back to pedo.
• 16:55
  SPEAKER_01: You'll do anything for your kids.
• 16:56
  SPEAKER_01: So if your kids need braces, they want to look cool at school and all that, 100% you're gonna do it.
• 17:02
  SPEAKER_01: Um, but if but if your patient base is built on a a lot of adults with invisalign, your practice could be challenged in uncertain economic times.
• 17:11
  SPEAKER_00: Yeah, and and we're seeing, you know, more and more of these DSOs acquiring a pediatric practice.
• 17:17
  SPEAKER_00: And rather than going and acquiring the ortho practice next door, they're just like, hey, let's go hire an orthodontist to go treat all your cases, right?
• 17:24
  SPEAKER_00: Because that's kind of the that's kind of the foolproof method rather than that adult ortho.
• 17:28
  SPEAKER_01: Yeah, revenues walking out the door.
• 17:30
  SPEAKER_01: And so that's why we've seen ortho started to go a little bit more uh consumer-facing with their marketing, right?
• 17:36
  SPEAKER_01: It's historically it's been a very referral-based practice or referral-based specialty where they rely on pediatric dentists and GPs to send them cases, but now it's like, oh wow, I need to go do more marketing, more digital marketing, get out there in the community because my pediatric dentists and my GP, they're doing limited ortho treatment right now.
• 17:55
  SPEAKER_01: And so uh all that to say, as Michael said, you know, um the specialty is still very strong and certain pockets, it's extremely strong.
• 18:03
  SPEAKER_01: Um, but it just kind of depends on, you know, your patient population, your same same store sales growth, what you're doing in marketing, and also where you're located.
• 18:10
  SPEAKER_00: Yeah, and you know, like I would say still some of the very best practices we see across the dental are ortho practices, right?
• 18:19
  SPEAKER_00: Like they can have incredible margins with doctors that are collecting a ton, like there are still some unbelievable practices out there that we see every day.
• 18:26
  SPEAKER_01: Yeah, absolutely.
• 18:27
  SPEAKER_01: So we've talked about um, you know, GP practices, we've talked about a few specialties, you know.
• 18:32
  SPEAKER_01: Let's let's zoom out a little bit, Michael.
• 18:35
  SPEAKER_01: And so if I'm a practice owner, whether it's GP or specialty, you know, a few specialties we didn't hit on was Indopereo Prost.
• 18:43
  SPEAKER_01: Um, but if I'm a specialty owner or a GP um owner, what are DSOs looking for in my four walls?
• 18:49
  SPEAKER_01: How can I start controlling the narrative um to optimize my outcome to partner with the DSO?
• 18:56
  SPEAKER_00: Yeah, such a good question.
• 18:57
  SPEAKER_00: Because guys, like highly encourage you like do this with the end goal in mind, right?
• 19:03
  SPEAKER_00: Like reverse engineer into the practice you want to achieve the goal that you've set for yourself.
• 19:08
  SPEAKER_00: Well, we talked about it's actually pretty topical that we talked about New Year's resolutions because like I think every doctor should have resolutions on their practice and then reverse engineer into the daily habits they need in order to hit that goal.
• 19:19
  SPEAKER_00: And so, like, like you kind of said it a little bit at the beginning, Brian, but there are so many things that DSOs look at when they're looking at your practice, right?
• 19:26
  SPEAKER_00: So effectively what they're doing is they're saying, what is the risk profile of this practice and how comfortable am I in that risk profile?
• 19:34
  SPEAKER_00: The more comfortable I am in it, the more I'm probably willing to pay for it.
• 19:37
  SPEAKER_00: The less comfortable I am with the risk profile, I'm either gonna pay less or I'm just not gonna make an offer.
• 19:42
  SPEAKER_00: Well, what drives the risk profile?
• 19:44
  SPEAKER_00: Well, there's a couple of things, like you said, geography is a major one.
• 19:47
  SPEAKER_00: Two practices, let's just say they're the same.
• 19:49
  SPEAKER_00: One's in Dallas, Texas, and one is in small town, Texas.
• 19:52
  SPEAKER_00: They're probably gonna get different offers.
• 19:54
  SPEAKER_00: Why?
• 19:54
  SPEAKER_00: Well, the buyer would say, hey, it's easier for me to recruit the next doctor to Dallas than it is to recruit to the small town, Texas.
• 20:01
  SPEAKER_00: So geography is a is a huge thing.
• 20:03
  SPEAKER_00: Now, you can't really control that once you own your practice.
• 20:06
  SPEAKER_00: So take it for what it is, it matters, but it's not something you can really do to change it.
• 20:11
  SPEAKER_00: Things that you can impact, how clean are my financials?
• 20:14
  SPEAKER_00: Right?
• 20:14
  SPEAKER_00: Like, do I have clean, readily available information both from my practice management system and also on the financial statement side?
• 20:22
  SPEAKER_00: Clean financials, clean practice management information, data.
• 20:25
  SPEAKER_00: Guess what?
• 20:26
  SPEAKER_00: Like, people know what they're buying when you have that and they're more comfortable.
• 20:29
  SPEAKER_00: If there's questions or things that they're concerned about because they can't see it, they're probably going to pay less for your practice.
• 20:35
  SPEAKER_00: Like Brian, like you said, payer mix matters, right?
• 20:38
  SPEAKER_00: Medicaid is definitely more frowned upon than fee for service.
• 20:42
  SPEAKER_00: I've actually also started hearing fee for service in certain cases can be more frowned upon than PPO.
• 20:47
  SPEAKER_00: Why?
• 20:48
  SPEAKER_00: Well, guess what?
• 20:48
  SPEAKER_00: PPO is almost a guarantee that you're getting patients.
• 20:51
  SPEAKER_00: A lot of times fee for service is dependent on the doctor being there.
• 20:54
  SPEAKER_00: Senior doctor, right?
• 20:55
  SPEAKER_00: Right.
• 20:55
  SPEAKER_00: And if the doctor leaves, and like if we're building this model out for the future and that senior doctor leaves in five years, am I sure those fee for service patients are going to come back?
• 21:04
  SPEAKER_00: It's actually very interesting, right?
• 21:05
  SPEAKER_00: Because like in your mind as an owner, you're thinking, well, fee for service is the golden ticket.
• 21:09
  SPEAKER_00: And you're like, well, yeah, it's the best, the most profitable.
• 21:12
  SPEAKER_00: But at the same time, it does leave a little bit more risk about the recurring revenue aspect.
• 21:16
  SPEAKER_00: So pay or mix matters.
• 21:18
  SPEAKER_00: I think, you know, if you can get to 100% fee for service, especially in like GP or some of those specialty lands, that's probably better.
• 21:24
  SPEAKER_00: Um, but drive taking PPO is not frowned upon.
• 21:27
  SPEAKER_00: Payer mix, case mix, things you're doing in the practice, are you doing specialty?
• 21:31
  SPEAKER_00: Are you not doing specialty?
• 21:33
  SPEAKER_00: Um, what is the growth that you could do in a practice, right?
• 21:35
  SPEAKER_00: So like if a DSO looks at your practice and says, hey, I think I can grow this thing and double it by adding associates or adding a second location or adding different types of cases.
• 21:45
  SPEAKER_00: That's all stuff that they look at, right?
• 21:47
  SPEAKER_00: There's no one size fits all at the end of the day.
• 21:49
  SPEAKER_00: This is an inefficient market.
• 21:51
  SPEAKER_00: We kind of talked a little about multiples earlier.
• 21:53
  SPEAKER_00: At the end of the day, like everything's inefficient.
• 21:56
  SPEAKER_00: Everything it is it depends in this market.
• 21:58
  SPEAKER_00: At the just have Readily available information and know what you're looking for.
• 22:02
  SPEAKER_00: I would say that's probably what the best way you can guide your practice.
• 22:05
  SPEAKER_00: Anything you'd want to add there?
• 22:06
  SPEAKER_01: Staff turnover.
• 22:07
  SPEAKER_01: Yeah, it's staff and doctor turnover.
• 22:09
  SPEAKER_01: So if you've if you've um had just associate after associate after associate leaving, it's gonna be hard to pin the blame on all ten of these.
• 22:18
  SPEAKER_01: It's gonna be a question off.
• 22:19
  SPEAKER_01: It's certainly gonna be a question.
• 22:20
  SPEAKER_01: If you've if you've you're if you don't have good staff continuity, man, that's a that's a yellow flag.
• 22:24
  SPEAKER_01: It's not a red flag, but you start out and it becomes expensive.
• 22:27
  SPEAKER_00: Yep, right?
• 22:28
  SPEAKER_00: Yep.
• 22:28
  SPEAKER_00: So it's definitely a question every single time.
• 22:31
  SPEAKER_00: So with that, Brian, like let's let's finish up with the last topic here.
• 22:34
  SPEAKER_00: You know, what are private equity groups looking for out of the DSOs and the consolidators?
• 22:38
  SPEAKER_00: And kind of what's the state of the recap market?
• 22:40
  SPEAKER_01: Yeah, I mean, I think we're gonna, you know, we mentioned the um the smile design deal with with Heartland earlier in the episode.
• 22:47
  SPEAKER_01: You know, the other one we didn't mention was the My Orthos deal with with smile doctors.
• 22:52
  SPEAKER_01: I think we're gonna start seeing a lot more of that.
• 22:54
  SPEAKER_01: Um, and I consider that a good thing for the industry.
• 22:56
  SPEAKER_01: There's probably a little bit too many options out there um for sellers, and I would rather there be less options of higher quality.
• 23:04
  SPEAKER_01: Yeah, right.
• 23:05
  SPEAKER_01: And so I think we're gonna continue seeing some of that DSO to DSO consolidation.
• 23:10
  SPEAKER_01: I mean, in fact, we're representing one right now, right?
• 23:12
  SPEAKER_01: And so um that they um they have run through their capital and they need to find a partner.
• 23:18
  SPEAKER_01: And so I think we'll see continued consolidation from the DSO to DSO.
• 23:23
  SPEAKER_00: And honestly, like that's the second phase of consolidation, right?
• 23:25
  SPEAKER_00: Like it's pretty, it's not like that's abnormal listeners, like that's what we see across every consolidation.
• 23:30
  SPEAKER_00: So there's kind of a couple different phases of consolidation.
• 23:33
  SPEAKER_00: The first phase, you take a very fragmented industry and you start bringing it together.
• 23:37
  SPEAKER_00: And that's kind of what we've had, right?
• 23:38
  SPEAKER_00: And that's kind of what's driven the 300 plus DSOs out there, and there's probably significantly more than that if you include these like, you know, five to 10 group practice groups.
• 23:47
  SPEAKER_00: And the second phase of consolidation is okay, 500 different DSOs out there.
• 23:52
  SPEAKER_00: Well, how do we pair this down to 120?
• 23:54
  SPEAKER_00: Right.
• 23:54
  SPEAKER_00: And it'll keep paring down.
• 23:55
  SPEAKER_00: Think about grocery stores.
• 23:56
  SPEAKER_00: There's not that many options in the country to go get your groceries.
• 23:59
  SPEAKER_00: Why?
• 23:59
  SPEAKER_00: Eventually they start buying each other out and they form these mega grocery stores, and then no one can really compete with them, right?
• 24:04
  SPEAKER_00: And they kind of bully out all the little grocery stores.
• 24:07
  SPEAKER_00: That's kind of what we're seeing, and that's a good thing.
• 24:09
  SPEAKER_01: Yep.
• 24:09
  SPEAKER_01: Yep.
• 24:09
  SPEAKER_01: And so I think, you know, as as private equity looks to acquire a DSO, um, the things that they are looking at is one strong leadership, both at a corporate level and at a doctor level.
• 24:21
  SPEAKER_01: So at the corporate level, how long has that executive team been in place?
• 24:24
  SPEAKER_01: Um, do they know what they're doing?
• 24:26
  SPEAKER_01: Have they been able to scale these practices?
• 24:28
  SPEAKER_01: Are they made them better?
• 24:29
  SPEAKER_01: Have they made them more efficient?
• 24:31
  SPEAKER_01: Um, have they done all those things to maximize the practices?
• 24:35
  SPEAKER_01: Um, so that is one thing that's crucial.
• 24:38
  SPEAKER_01: The other thing, are they truly a platform?
• 24:41
  SPEAKER_01: Are they all on the same practice management system?
• 24:43
  SPEAKER_01: They all use the corporate services that the DSO provides.
• 24:46
  SPEAKER_01: All of that matters because five or six years ago, you could be a you know, 50 location DSO and it's just, you know, it's a heart of stray cats, right?
• 24:54
  SPEAKER_01: They're doing a little bit of accounting, a little bit of marketing.
• 24:57
  SPEAKER_01: The private equity's gotten so much more smarter on the space that they want they want a well-oiled machine.
• 25:03
  SPEAKER_01: They don't want a project, right?
• 25:04
  SPEAKER_01: And they're not gonna pay a premium valuation for a project.
• 25:08
  SPEAKER_01: Yeah, yeah.
• 25:08
  SPEAKER_00: Right?
• 25:09
  SPEAKER_00: Like it's unfortunate, right?
• 25:10
  SPEAKER_00: Because like I think a lot of the DSOs were a victim of the times.
• 25:14
  SPEAKER_00: Yep, right.
• 25:14
  SPEAKER_00: Like when they were formed, you could just be a consolidator and get arbitrage on like I bought this platform for a six times and I'm gonna sell it for a 15 times.
• 25:23
  SPEAKER_00: You could do that, but the days of that are gone, and I don't think they're ever coming back as private equity has learned more about the space.
• 25:29
  SPEAKER_00: And it's interesting, I actually heard this like a week ago, I think, and I thought it was really good.
• 25:32
  SPEAKER_00: Private equity might make a mistake once, they very rarely make it twice, right?
• 25:38
  SPEAKER_00: They're gonna learn from their mistakes, and I think they learned pretty quickly.
• 25:42
  SPEAKER_00: You can't have an aggregate, right?
• 25:45
  SPEAKER_00: You gotta have a business and you gotta have a plan to replace these doctors.
• 25:48
  SPEAKER_00: We say it all the time, right?
• 25:49
  SPEAKER_00: Like these dental practices with their doctor there are worth a lot of money.
• 25:53
  SPEAKER_00: If there's no doctor there, they're worth hardly anything, right?
• 25:56
  SPEAKER_00: And so, like, can these groups recruit doctors?
• 25:58
  SPEAKER_00: Can they maintain clinical care?
• 26:00
  SPEAKER_00: Can they keep the doctors incentivized and motivated?
• 26:02
  SPEAKER_00: Like, that is so key.
• 26:03
  SPEAKER_01: Well, speaking of the doctors, that was my last point doctor happiness.
• 26:07
  SPEAKER_01: Yep.
• 26:08
  SPEAKER_01: That is so tough to judge, right?
• 26:10
  SPEAKER_01: We talk to our clients all the time, like, hey, the financials are what they are, the offer is what it is, that's very black and white.
• 26:15
  SPEAKER_01: The hard part to figure out is your happiness and their happiness, right?
• 26:18
  SPEAKER_01: And so if you have a DSO that's properly a platform that has very strong executive leadership, that has same store sales growth, that has bought practices and made them better, and doctors are happy, that's a pretty dang good group.
• 26:33
  SPEAKER_00: 100%, right?
• 26:34
  SPEAKER_00: Because like and just think about it.
• 26:35
  SPEAKER_00: If you're gonna write a huge check to buy a bunch of dental practices, what's the last thing you want to have happen?
• 26:40
  SPEAKER_00: All the doctors were ticked off the whole time and now they all quit because they got to their equity event.
• 26:44
  SPEAKER_00: That's a pretty bad investment.
• 26:45
  SPEAKER_00: Right.
• 26:46
  SPEAKER_00: And so, yeah, I agree with that 100%.
• 26:48
  SPEAKER_01: And so if I'm a doctor looking to sell my practice, you need to start looking at the leadership, executive uh at the executive leadership of the DSO.
• 26:56
  SPEAKER_01: You need to understand if they've made practices better.
• 26:58
  SPEAKER_01: Not only have they grown them, but they made them more efficient.
• 27:01
  SPEAKER_01: And are their doctor partners happy, right?
• 27:04
  SPEAKER_01: Those are the things you have to start asking.
• 27:07
  SPEAKER_00: Couldn't say it any better.
• 27:08
  SPEAKER_00: Couldn't say any better.
• 27:09
  SPEAKER_00: Well, folks, uh, that was great.
• 27:11
  SPEAKER_00: Great uh little look at 2026 here.
• 27:13
  SPEAKER_00: We'll see you next time.
• 27:16
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• 27:19
  SPEAKER_01: You'll get every episode as soon as it's released, and you can always revisit past conversations anytime.
• 27:24
  SPEAKER_00: If you want to learn more about what we do when we are away from the table, visit sevenpillarsadvisory.com, where we are helping numerous clients across the country with the biggest financial decision of their life.
• 27:33
  SPEAKER_00: Thanks for being a part of today's conversation.
• 27:35
  SPEAKER_01: Remember, every successful business transition starts with the right people at the table.
• 27:39
  SPEAKER_01: So bring your questions, pull up a seat, and let's navigate it together.
• 27:43
  SPEAKER_01: We'll see you next time at the advisors table.