For years, private equity has been the default exit for DSOs looking to cash out or raise capital. Park Dental Partners’ December IPO may be a sign that’s starting to change — and some industry watchers say it won’t be the last.
In December, Park Dental Partners announced last year an initial public offering of 1,535,000 shares of common stock at $13 per share. The DSO said it plans to use proceeds from the IPO to support practice acquisitions, capital expenditures, working capital and repayment and financing of outstanding debt. Since then, the company has expanded its network in several states and announced plans to acquire Village Family Dental DSO in North Carolina.
Park Dental Partners reported $66.2 million in second-quarter revenue, a 5.1% increase from $63 million in the same period last year, driven by acquisitions, favorable reimbursement trends and growth in clinical hours.
Miguel Mireles, the director of investment banking at Skytale Group, told Becker’s he expects the public to become a growing force in the industry against other types of buyers.
“You may not think of the public market as a buyer, but it is an exit and liquidity event for these larger DSOs, which we all know have had trouble trading over the last two to three years given the interest rate movement from 2021 and 2022 to where it is now,” he said. “I’d say absolutely PE will be the dominant player, but we’ll continue to see other groups get creative to get into dental.”
Richard Hall, chair of the board for U.S. Oral Surgery Management in Irving, Texas, told Becker’s that the next natural step for some DSOs will be to go public as their networks continue to grow.
“If a public option does not exist for some of the larger platforms, then the investors are not that interested because they’re going to come in and say, ‘I’m going to buy you, and you’re doing $300 million in EBITDA now. Under the three to five years or seven years that I’m going to hold, it is going to get to $400 million in EBITDA. Then what do I do with it?’,” Mr. Hall said. “There has to be a public option for those investors to continue to want to invest in the space, and I think that’ll probably happen. There’s a couple small ones out there currently, but somebody of scale needs to go public in our sector.”
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