Private equity continues to funnel into dentistry — How are DSOs responding?

DSO + DPMs

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The dental service organization continues to boom with the market estimated at $73 billion in 2017, according to Harris Williams & Co. As the market continues to expand, private equity firms are looking to get a piece of the action, according to Bloomberg.

Effingham, Ill.-based Heartland Dental is among the DSOs that have gained attention from PE firms. KKR & Co. bought 58 percent of the DSO in April, valuing the company at $2.8 billion. Heartland Dental comprises more than 800 offices in 36 states, making it the largest U.S. dental management company.

Heartland Dental's founder Richard Workman, DDS, stopped practicing in 1996 to get started in the DSO industry. After the PE investment, Dr. Workman is left with a 10 percent stake in company, valued at close to $170 million.

Former Heartland Dental employee Alan Aceirno, DDS, broke away to start his own DSO, DecisionOne Dental Partners in Schaumburg, Ill. According to Bloomberg, he receives calls bi-weekly from PE firms looking to invest.

Berkshire Partners bought a stake in Raleigh, N.C.-based Affordable Care in 2015. The DSO has more than 200 offices. Another PE firm Ares and Leonard Green increased their ownership in East Syracuse, N.Y.-based Aspen Dental Management. Aspen Dental continues to grow and now has more than 650 practices.

However, not all DSOs are accepting PE investment offers. Irvine, Calif.-based Pacific Dental Services founder and CEO Steve Thorne has been hesitant to take investments. With more than 650 practices supported by the DSO, Mr. Thorne has concerns about the amount of debt taken on because of the private equity stake.

The American Dental Association estimates less than 10 percent of dentists are affiliated with corporate practices, Bloomberg reports. Advocates of DSOs are expecting more consolidation and private investments in the future.

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