Private equity in dentistry: Can it keep up its pace?

Private equity firms have continued to make an impact on the DSO and dental spaces this year, despite some predicting a slower year in 2024.

MB2 Dental, one of the country's largest dental groups, closed on a $2.34 billion unitranche debt facility earlier in 2024, which will fund acquisitions and future growth. Since closing on the debt facility, MB2 Dental expanded into West Virginia, its 40th state overall, and reached the 700-practice milestone

Some other notable moves in the dental private equity space in 2024 include Oral Surgery Partners receiving a credit expansion of more than $400 million, a Florida DPO securing an expansion and upsizing of its existing debt facility, as well as DSOs in the Midwest, Colorado and Texas gaining investments. 

While private equity has maintained its grasp on dentistry in 2024 up to this point, executives were not so sure that the economy would be strong enough to support continued investments. 

Greg White, DMD, the president and CEO of PepperPointe Partnerships in Lexington, Ky., said that limited capital, higher rates and increased patience from dentists could impact growth, especially for private equity firms. 

"As a result of that, I'm anticipating that there will be fewer deals, but I think private-equity-backed DSOs will be more selective in their transactions in the coming year, with finances being the primary determinant of that," Dr. White told Becker's. "They're going to look for bigger deals and fewer deals."

Mike Friguletto, CEO of Dallas-based Beacon Oral Specialists, pointed to the higher interest rates as a potential limiting factor for DSO expansion in 2024.

"High interest rates are a challenge just because they force you to be really precise in where you deploy capital because your tolerance for mistakes goes way down," Mr. Friguletto said. "You can't take as many bets in a high interest rate environment because if you make mistakes, they can come back to really hurt you financially."

With interest rates remaining elevated so far this year, and lawmakers increasing scrutiny of private equity in healthcare, it remains to be seen if private equity will continue the same level of investment in dentistry.

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