The Private Equity Pushback: Why Dental Practice Owners Need Sell-Side Advisors Now More Than Ever
In recent years, private equity (PE) has reshaped the dental industry. Dental practices, especially those with strong profitability and growth potential, have become hot commodities for PE firms eager to consolidate and scale through Dental Support Organizations (DSOs). This surge in interest has driven valuations to record highs, creating unprecedented opportunities for practice owners looking to sell.
However, the market is beginning to shift. As rising interest rates and economic pressures tighten their grip, private equity firms are taking a more conservative approach to acquisitions—a trend now known as the “private equity pushback.” For practice owners, this evolving landscape makes partnering with a sell-side advisor essential to securing optimal outcomes.
The Private Equity Pushback: What It Means
The private equity pushback refers to a recalibration of acquisition strategies by PE-backed DSOs. Factors such as soaring valuations, rising borrowing costs, and heightened scrutiny on investment returns are driving firms to rethink their acquisition tactics. The result?
Tighter Valuations: Buyers are scrutinizing financials and adjusting valuation methodologies to avoid overpaying. Practices that once commanded sky-high multiples are now facing tempered offers.
Selective Acquisitions: PE firms are focusing on practices with clear growth opportunities, strong EBITDA margins, and prime locations, making it harder for less-established practices to attract competitive bids.
Aggressive Negotiations: Buyers are leveraging their resources to push for favorable deal terms, including lower multiples, extended payment timelines, and stricter earn-out conditions.
For sellers, this means navigating a market that, while still lucrative, is less forgiving and more complex than ever before.
The Role of Sell-Side Advisors in Today’s Market
Amid this pushback, sell-side advisors have become indispensable for dental practice owners seeking to maximize value. Unlike brokers who merely connect buyers and sellers, sell-side advisors provide a comprehensive suite of services designed to protect your interests and enhance the sale process. Here’s why they are critical during this period:
Creating a Competitive Marketplace
Sell-side advisors excel at generating multiple offers by presenting your practice to a broad range of qualified buyers, including PE firms, DSOs, and strategic buyers. By fostering competition, they can drive up valuations and counteract the downward pressure created by the private equity pushback.
Tailored Valuation Strategies
In today’s cautious market, a well-supported valuation is essential. Sell-side advisors dive deep into your financials, highlighting key drivers such as recurring revenue, patient retention, and operational efficiencies to position your practice as a premium acquisition target.
Industry Expertise and Relationships
Experienced sell-side advisors have extensive networks and understand the nuances of the DSO and PE space. They know which firms are actively acquiring, their specific criteria, and how to align your practice with their goals, increasing the likelihood of a successful transaction.
Negotiating from Strength
As PE buyers grow more aggressive in their negotiations, having a seasoned advisor on your side is critical. Sell-side advisors advocate for you, ensuring not only a fair purchase price but also favorable terms for earn-outs, equity rollovers, and post-sale employment agreements.
Protecting Your Interests
A dental practice sale involves complex contracts and potentially unforeseen risks. Sell-side advisors provide expert guidance throughout the process, minimizing your exposure to unfavorable terms and helping you navigate the intricacies of the deal.
Why Now Is the Time to Act
The private equity pushback doesn’t mean the market for dental practices is drying up—it simply means sellers need to approach the process strategically. For practices with strong financial performance and growth potential, opportunities remain abundant. The key is presenting your practice in the best possible light and creating a competitive environment among buyers.
This is precisely where a sell-side advisor adds value. Their ability to manage the process, build relationships with buyers, and negotiate on your behalf can make the difference between a good deal and a great one.
The dental industry is at a crossroads. Private equity is still a driving force, but its approach to acquisitions is evolving. For practice owners considering a sale, this new reality demands careful planning and expert representation. A sell-side advisor not only levels the playing field but also positions you to capitalize on your years of hard work and investment.
As the market adapts to the private equity pushback, partnering with a trusted sell-side advisor ensures your interests are protected, your practice is presented in its best light, and you achieve the maximum possible value for your business.
If you’re ready to sell, now is the time to take control of the process—with the right advisor by your side.
