Dental Mergers and Acquisitions: How To Maximize M&A Value in Dentistry

The dental industry is growing, and that includes dental mergers and acquisitions (M&As). The global dental market is projected to grow from $38.95 billion in 2024 to $95.37 billion in 2032. More and more dental practices have begun purchasing other practices in their area or looking for buyers to better meet their revenue and profitability goals.

Is your dental practice considering M&A? Whether you’re looking to absorb another practice, hire a dental service organization (DSO), or sell your dental office, you should approach this process strategically to maximize value.

Understanding Dental Mergers and Acquisitions

If you’re considering a merger or acquisition, review this basic information to understand how these ventures work and why they are becoming increasingly popular within the dental industry.

What Are Dental Mergers and Acquisitions?

Dental mergers and acquisitions occur when a dental office combines its operations with one or more practices. While “mergers” and “acquisitions” are often used interchangeably, it is important to know how they differ.

Merging creates a new practice or entity — the two separate practices cease to exist, now operating under the new practice title. Meanwhile, a practice can acquire another practice and absorb its patient base, assets, and equipment. The purchased practice may move to the buyer’s practice location or continue operating out of the same office under new management.

Current Trends in Dental Practice Mergers and Acquisitions

Running a dental practice has become more challenging in the past decade than ever before. Dental practices must stay competitive in a highly saturated, ever-evolving landscape, keep up with new specialty services and modern equipment, and maintain positive momentum to outpace rising costs.

That’s why many private practice owners are opting to sell their practices to DSOs. These entities manage the administrative and business sides of running a dental practice. Dykema DSO Industry Group is a major one with more than 650 affiliated practices in 32 states.

As many as 13% of dentists nationwide were affiliated with a dental service organization in 2022, and these entities enjoyed a global market size of $139.3 billion in 2023. Consolidating a DSO helps practice owners manage overhead costs without sacrificing existing doctor contracts.

As more and more baby boomers reach retirement age, with 2024 seeing the greatest surge of retirement-age Americans in U.S. history, dental acquisitions continue to increase. Retiring dentists are opting to sell their businesses to existing practices or DSOs to promote a smooth transition while enhancing patient experience.

Benefits of Mergers and Acquisitions for Dental Practices

A dental practice merger could spell immense success for your practice. Successful transactions promote several key benefits.

Growth Opportunities

Merging with another practice or selling ownership to a DSO can provide growth opportunities, particularly organic growth potential. You can gain:

• Access to a larger patient base
• An ability to expand your services to better reflect trends in the dental space
• Entry into new markets, such as merging with a pediatric dentist to begin providing child dentistry

Financial Benefits

With the appropriate infrastructure and properly prepared financials, dental mergers and acquisitions can also offer economic benefits, such as:

• Increased profitability due to lower overhead costs
• Improved cash flow from additional patients and dental care treatments
• Higher business value overall
• Financial sponsors who exclusively invest in acquiring businesses

Enhanced Operational Efficiency

Your practice may also have the opportunity to operate more efficiently within a merger or acquisition. This venture gives you access to shared resources, allowing you to improve treatment outcomes without needing to purchase new equipment on your own. It also allows for streamlined processes with the help of additional administrative staff.

Key Steps in the Dental M&A Process

Are you ready to dive into a dental merger or acquisition? Follow these steps to facilitate a successful sale or purchase for all parties involved.

Preparing Your Practice for M&A

Start by setting up your practice to navigate a prosperous M&A through processes like the following:

• Auditing your finances and addressing debt issues
• Improving operational efficiencies so that you can import those same tactics into your new business model
• Assessing your business value to determine a fair sale price or evaluate a purchase price you can afford

Identifying the Right Partner or Buyer

Don’t agree to an M&A just because someone gives you a good offer. Take the time to find the right potential buyer or selling dentist by reviewing these criteria:

• Cultural fit: How would the other practice’s employees fit with your staff? Alternatively, how would selling to a dental care alliance or DSO change your practice’s culture?
• Financial stability: When you identify potential buyers or acquiring businesses, review their financial stability and accounting practices to get a feel for whether an M&A would be sustainable for them.
• Business goals: Do a potential buyer or seller’s practice goals align with yours? How would partnering with this entity impact your progress toward your goals? Will you be able to maintain clinical autonomy, assuming that is important to you?

Conducting Due Diligence

Dental mergers and acquisitions are complex legal processes that have immense implications for your dental practice’s compliance, financials, and overall sustainability. Do your due diligence before entering this sale process.

Review the other entity’s financials, explore all legal considerations, and assess your practice compatibility closely. Before signing any agreements, consult a business attorney for expert guidance.

Negotiating the Deal

Whether you are entering a merger or an acquisition, you can have some say in the terms of the sale. Negotiate a deal that works for your practice, reflects your enterprise value, and protects your interests. You can provide a counter-offer or request adjustments to how the entity has structured the deal.

Challenges in Dental Mergers and Acquisitions

Dental M&As come with several challenges your practice should be aware of. While the pros outweigh the cons for many dental practices, in some cases, it may make more sense to continue operating as a solo practice with private equity. You should consider all options for achieving your business goals, such as adding artificial intelligence or implementing procurement solutions.

Cultural Integration

Dental mergers and acquisitions can be hard on all employees involved. Your staff and patients are used to the way you have always done things, and a new dentist, DSO, or managing director won’t run your practice the same way.

Misalignment in practice cultures can impact staff and patient retention. During this time, it is more important than ever to provide competitive employee benefits to aid retention.

Financial Risks and Liabilities

Sometimes, dental M&As make financial sense, but other times, they wreak more economic havoc than they are worth. Common challenges include hidden debts, unanticipated costs in the sale process, and fluctuations in practice valuations. You’ll also face the DSO’s management fee if it is not outright buying your practice.

Maintaining Patient Satisfaction

Patients may become frustrated with the changes that arise from an M&A. Maintaining a predictable patient experience becomes challenging when other dentists enter your practice.

Top Tips and Best Practices for Successful Dental M&As

Despite the challenges involved in dental mergers and acquisitions, approaching this process strategically can help you successfully merge your practice with another entity.

Effective Communication

Keep staff, patients, and stakeholders informed throughout the M&A process. Be transparent about what you hope to gain from this process and how you expect your practice to change as a result.

Leveraging Professional Advisors

Also, don’t go it alone. Consult legal counsel, accountants, and professional M&A consultants to navigate the complexities and challenges that arise during this process. It’s worth the extra money to bring a professional into the equation to prevent costly mistakes or poor business decisions.

How Weave Supports Dental Mergers and Acquisitions

Mergers and acquisitions are complicated yet ultimately fruitful business ventures for many practices within general dentistry. If you’re gearing up for this process, Weave can provide support. Allow our patient automation platform to streamline many of the rote tasks involved in running your dental practice so that you can focus on this sizable transition.

Streamlining Communication During Transitions

Keep patients in the loop with Weave’s communication solutions, such as phones, reminders, and two-way texting. You can send automatic text messages to your entire patient base to update them about M&A-related changes and ensure continuity in the patient experience.

Enhancing Patient Management with Weave’s Tools

Weave’s online scheduling, digital forms, and automated reminders help maintain patient flow and satisfaction during mergers or acquisitions. Patients can book their own appointments online, fill out digital forms before their appointments, and receive automatic reminders about appointment dates, freeing up your staff’s time.

Managing Financial Transactions with Weave

Maintain good accounting practices leading up to the M&A while streamlining financial operations. Weave’s payment and billing solutions can reduce the administrative burden of financial transactions, improve cash flow, and raise your business valuation.

Successful dental mergers and acquisitions can help you achieve your business’s goals, but they require ample preparation, effective communication, and professional help. Weave’s suite of tools can support your dental office during an M&A; get a demo today to learn how.