Defining Success in Dental Service Organizations

Dental Service Organizations (DSOs) are management companies providing administrative, back-office, and operational services to dental practices. This long-established structure has been tailored and refined to support both general dentistry practices and specialty providers, including pediatric dentistry, orthodontics, oral surgery and implants, endodontics, and periodontics. Since the early 1990s, DSOs have undergone multiple waves of consolidation, each bringing new growth strategies and equity models. The most recent wave of platform deals peaked in the earlier part of this decade. M&A activity has since slowed for a variety of reasons. Inflation, rising interest rates, and staffing shortages have increased operating expenses, while reimbursement rates have remained relatively consistent. The resulting margin pressure has forced sponsors and operators to become more exacting in recent years as the backlog of ageing portfolio companies grows.

Dental is a well-worn playbook for PE, but the sector still rewards a thoughtful approach. Finding success investing in DSOs now requires a robust approach to workforce management; proactive tracking of emerging technology trends; and a disciplined growth strategy that considers geography, specialization, and organizational structure. Although the DSO market has become a have-and-have-not category, we believe successful exits remain possible for high-quality platforms exhibiting strong fundamental performance—critical KPIs include same-store sales growth and above-average provider retention— and that can identify the “best fit” strategic or financial partner at exit. We also believe fundamental industry tailwinds and the emergence of innovative models should continue to support new DSO investments over the next several years.

Download the report by filling out the form. Please contact us to request more information.