For a decade, the pitch to dentists was simple: sell your practice to a private equity-backed dental service organization, take a large check up-front, roll part of your equity into the platform, and collect a second, bigger payout when the platform sells. For some dentists, the second payday isn’t coming.
“Upside down” is the term some DSO executives now use for that situation. Here’s how it happens and what it means for the dentists inside those organizations.
What does “upside down” mean?
For dentists, it means the equity they rolled into a DSO is worth far less than they were promised — or nothing at all. Dylan Bates, CEO of SALT Dental Partners, told Becker’s in October that doctors in those organizations can see their equity “impaired or diminished, or gone to zero.”
Debt is a big part of the problem. Greg White, DMD, president and CEO of Lexington, Ky.-based PepperPointe Partnerships, compared it to a $1 million house carrying a $3 million mortgage at Becker’s Future of Dentistry Roundtable in September.
For affiliated dentists, the debt matters because it gets paid before they do.
How were the deals built?
In many private equity-backed deals, the private equity money was effectively borrowed, Dr. White said.
“It was an interest-only loan,” he said. “The private equity money only went in to buy the majority ownership in the platform.”
In Dr. White’s example, dentists received 60% of the multiple up front and kept the rest as equity in the platform. That rollover equity pays off only when the platform is recapitalized or sold.
“So, when the recap does occur, what ends up happening is all of that loan money has to be paid back first,” Dr. White said.
Why did the model stop working?
The math depended on cheap debt and rising valuations. DSOs could buy practices at five to six times EBITDA and trade them at 13 to 14 times or higher, according to Richard Hall, board chair of Irving, Texas-based U.S. Oral Surgery Management. Then interest rates “more than tripled,” Mr. Hall said at the roundtable.
“It’s no longer just a roll up strategy for a quick flip,” he said. “Those days are gone.”
Stan Kinder, founder and president of consulting firm Everything DSO, told Becker’s in 2025 that “private equity historically leverages their equity investments with debt,” and that “there have been a couple of failed recapitalization efforts from some fairly large-sized DSOs.”
What does it look like in the market?
Deal activity has slowed. Dentistry recorded 51 transactions in the third quarter of 2026, down 27% from the same period in 2025, according to Levin Associates. Of those, 30 were DSO deals and 16 involved PE-backed DSOs.
Some platforms have changed hands in other ways. Sarasota, Fla.-based Dental Care Alliance is a lender-owned organization. Smile Partners USA, based in Troy, Mich., recapitalized earlier this year through a continuation fund.
What does it mean for dentists?
For dentists who sold, the result can be a sharp drop in income without the payout that was supposed to make up for it. Dr. White described a dentist earning $1 million a year who sells and then earns $300,000 as an employee, a hypothetical he used to show how the gap adds up.
“They bought an entrepreneur out and they gave him a job,” Dr. White said.
For affiliated doctors, “it’s their practice, it’s their brand,” Mr. Bates said.
What comes next?
Executives expect consolidation to continue, but on different terms. “The rapid consolidation is over,” Dr. White said. “Consolidation will be taking place in the bigs eat the middles and the middles eat the littles.”
Organic growth is now “mission critical,” Mr. Bates said, and growth by acquisition alone no longer works.
“Gone are the days where you can just aggregate revenue and EBITDA and make it for the long haul,” he said. Investors now look for companies that “truly operate and behave like an integrated, well-oiled machine.”
For dentists weighing a deal, the questions extend past the up-front multiple: how much debt the platform carries, when the next recap is expected, and what has to be paid back before their equity is worth anything.
