2020 Mid-year Group Practice And Dso Update

Considering where the economy was headed in late March and early April, the dental economy currently finds itself in a surprisingly bullish position. Most of Aligned Dental Partners’ practices have set new records for production in June and July and are poised for a profitable second half of the year. This strong post-Covid reemergence is largely due in part to pent-up patient demand, however most practices have full hygiene and doctor schedules for the immediate 90+ days. The most notable impact that Covid has had on dental practices is the shift in the job market. It is now an employer’s market with a massive influx of furloughed, laid-off, or out of work dentists, dental assistants, and dental business professionals. One exception to this is the scarcity of dental hygienists who continue to be in high demand and low supply.

Merger and acquisition activity, initially having stagnated in Q2, has substantially picked up in Q3. While many deals were re-traded and devalued by 1-2 turns of EBITDA from some major DSOs in the US and Canada in the last few months, Aligned Dental Partners is facilitating more mergers today than ever before for dentists and specialists. Entrepreneurial dentists and dental groups are choosing mergers as their preferred method of consolidation for various reasons. In the current lending environment, access to capital and the speed that banks are processing loans has become greatly strained. Mergers require very little capital on the front end and provide immediate synergies and a substantial increase in value for all parties. Additionally, facilitating a merger today does not require the sale of either party’s business, which is advantageous currently while valuations have dipped post-Covid.

Aligned Dental Partners’ future outlook for the remainder of the year is cautiously optimistic. We take an “aggressive-conservative” approach when supporting our clients through M&A; by that we mean we are aggressive in pursuing growth opportunities but are conservative in our deal structures and risk-mitigation strategies. This same aggressive-conservative approach is how we look towards the second half of 2020; Aligned Dental Partners sees abundant growth opportunities, organically and by M&A, for group practices and emerging DSOs, but is conservative about how to structure deals with uncertainty during this second wave of the pandemic.