2019 was another big growth year for Aligned Dental Partners’ DSOs and Group Practices. The industry estimates 22% of dentists are part of a Dental Group Practice or DSO and from our experience that number continues to grow. That number has doubled since 2010. With this increased trend, there has been an increased awareness and acceptance by dentists of DSO’s and Group Practices. Most dentists we talk to have a positive outlook on being associated with a group or DSO and this mindset has shifted over the past 5 years. While there are three categories of dentists today: solo; group practice and DSO we clearly see distinctions been made between the large top twenty “corporate” DSOs and the rest. The DSO’s of 10 years ago or longer are now well established within their models and are generally looked up as “corporates.” Being part of a group practice or DSO is now the new shiny trinket and the “cool” place to be for entrepreneurial dentists today.
With the rapid increase, Groups and DSO’s are now experiencing increased challenges with recruitment for high quality doctors, motivated clinical and operational staff, and experienced business professionals. In 2019 alone, Aligned Dental Partners’ clients relied on us to help identify and recruit 12 operational or executive leaders (Regional Director of Operations, Director of Operations, COO, CFO, CEO) in our respective groups.
More and more groups are turning to outside advisors to recruit key employees or provide training to develop the organization. Additionally, there has been a large increase in professional services firms which specialize in supporting Group Practices and DSO’s. There has been a large increase in legal and accounting firms that cater to this segment of the market. Everyone has become an “expert” in this space however Aligned Dental Partners is often engaged to fix, unwind and undo the overreaching and overzealous complicated models advisors lead them into.
2019 saw a heightened level of interest from new PE firms pursuing investments in the DSO space. Aligned Dental Partners alone met with or conferenced with 50+ PE firms to evaluate potential investments for our various groups and DSOs. Expectations of sellers has become inflated with many groups posing substantial risk for an investor. There has been an increase in the number of brokers pushing to create transactions and exits with PE firms. 2019 transactions have shown that investors are most attracted to Groups and DSO’s with strong infrastructure and stability prior to making an investment.
2020 is poised to be another growth year with the continuation of these trends. The key trend to watch will be the state of the economy and the likelihood of moving towards a recession. Should that occur, businesses that are not well capitalized will see challenges in continuing their growth. If the lending environment tightens, groups will need to have increased focused on initiatives to maximize organic growth.