CEOs of four DSOs recently connected with Becker's to share their plans to navigate economic challenges and how they expect the economic and financial landscape to impact the dental industry heading into 2024:
The trend that could accelerate DSO consolidation
Kristen Cusack. CEO of Phase 1 Equity (Southlake, Texas): One of the things that makes the dental industry so attractive to investors is its resiliency. While we do experience short-term downturns, we tend to recover quickly. It is critical we ensure all our practices are well positioned to reach the maximum number of patients. At Phase 1, we are working with all our practices to continue improving their visibility and attract more new patients.
MB2 Dental hopes to build on momentum in 2024: Q&A with Dr. Chris Villanueva
Chris Villanueva, DMD. Founder and CEO of MB2 Dental (Dallas): I can confidently say that MB2 Dental is not slowing down. We are wrapping up yet another record year and entering 2024 with a promising pipeline of prospective doctor partners that already surpasses the same period in 2023. While we continue to outpace the prior year, we've already seen fewer dental groups competing for deals, mostly due to a lack of capital or leverage challenges. Additionally, the increased cost of debt has been identified as a key factor limiting groups' ability to pay higher multiples, as seen in the past few years.
Prioritizing people: How 1 dental group prepares for 2024 success
Mike Friguletto. CEO of Beacon Oral Specialists (Dallas): 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. 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. It is less of a challenge for us but certainly one that we're paying close attention to. It's important to understand that the environment just limits your ability to be creative or to try new things.
How DSO strategy might change on multiple fronts in 2024, per 1 CEO
Greg White, DMD. President and CEO of PepperPointe Partnerships (Lexington, Ky.): Access to capital being more limited, rising interest rates and increased patience from the doctor population are all impacting growth. 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. They're going to look for bigger deals and fewer deals. For us, we're going to be much more selective in terms of purpose. I want to enter into relationships and help unite these doctors together that care about the things we care about.