Although executives don’t expect private equity to leave dentistry any time soon, some predict it will change form as the economy shifts and technology evolves.
Three dental executives joined Becker’s Future of Dentistry Roundtable Sept. 14-15 to discuss where private equity’s role in dentistry is headed over the next five years.
Note: Responses were lightly edited for clarity and length.
Question: Where do you expect private equity’s role in dentistry to be five years from now compared with today?
Richard Hall. Chair of the Board for U.S. Oral Surgery Management (Irving, Texas): I think you’ll continue to see significant participation from private equity in the dental space. When you think about what attracted private equity money to the dental space originally, a lot of those dynamics still exist today. You have strong demand, you have a very fragmented market — over 50% of the population in the United States doesn’t even go to the dentist on a regular basis currently, so there’s an untapped population yet to be served. You have very small, government-subsidized care. Some people believe — I’m one of them — there is no such thing as dental insurance. It’s a dental care discount coupon at best. Most of the plans cap out at $2,500. So, you’re getting very little revenue outside of your control, which is attractive to private equity investors.
There will always be private equity interest in good, solid businesses. Yes, we’re seeing a downturn most recently in private equity-backed healthcare. There’s a number of reasons for that, but I think this is just a normal cycle we’re going through, and you’ll continue to see private equity involved in the years ahead as well.
Greg White, DMD. President and CEO of PepperPointe Partnerships (Lexington, Ky.): I think private equity will stay involved in it as long as they want to, so the question becomes how long do they want to stay involved in it? It reminds me of a guy I went to high school with named Everett. Everett always had a girlfriend, but he would change them out when a more attractive one would come along. I think that’s exactly what private equity does. They’re agnostic about dentistry. They’re not agnostic about making money. Dentistry is like one stock in a mutual fund for most of them, so if they take a loss on it, it’s not a huge deal. They move on to something else. The dentist is doing time though. When you go through dental school, you go through college for four years, dental school, you specialize — you’re not entering a profession, you’re doing 25 to life. They’re going to be in it for the long haul. Now, as soon as Everett decides there’s a better looking girl, he’s going to move on, but the dentist is stuck there. I think it’s really important to understand that private equity will stay in it as long as it’s good for them. Whereas the dentist is in it for the long haul and they bet their entire life on it.
Hoss Said. Vice President of Children’s Primary Dental Group (San Diego) and CEO of Massoumi Dental Corporation (Chula Vista, Calif.): I believe private equity is going to be involved. However, the structure of it somehow is going to get changed. As we have seen, AI is getting involved in all kinds of areas of different industries. Even private equity these days is not going based on the relationship. They’re structured differently with AI verifying where you want to put your money [and] how you want to manage that money. AI has [become] a big role in that decision making. As long as you have invested in the culture and good leadership and good technology, then private equity is going to be more interested rather than anything else. So, it’s going to be a different way of funding versus what we have seen in the last 12-15 years.
