Those challenges could carry over in 2024, causing DSOs to cut down on spending and acquiring dental practices.
Imagen Dental Partners’ new chief development officer Josh Davis, said that because of current macroeconomic challenges in dentistry, many organizations are suffering from spending big in previous years.
“The biggest trend I’m following right now is just seeing a lot of the fallout from the buying spree and cheap capital that’s happened over the last few years, and seeing how that’s ultimately affecting those DSOs and their doctor-partner equity shareholders,” said Mr. Davis.
DSOs will likely scale back their spending due to the increasingly high cost of capital and interest rates. With tighter constrictions, companies will need to be smarter with their decisions.
“A few years ago, interest rates were so low that the cost of capital was incredibly easy to procure,” said Jim Mizouni, chief development officer at Sage Dental. “You didn’t necessarily have to be that diligent. For the whole industry, the cost of debt and cash is so high that I think it is forcing people to make very difficult decisions in terms of understanding how they want to place their bets and prioritize their available resources.”
There will obviously still be acquisitions and affiliations made by DSOs in 2024, but the experts who spoke with Becker’s suggested that volume will likely dip compared to past years because of these industrywide economic challenges and problems.
