DSOs that lack a more structured acquisition strategy may find themselves in financial trouble down the line, according to two executives.
Scottsbluff, Neb.-based Epic4 Specialty Partners recently acquired Beecroft Orthodontics, which includes eight locations in Virginia.
Epic4 CEO Sami Webb, DDS, and CFO John Pelikan recently spoke with Becker’s about their company’s growth and risks associated with bad acquisitions.
Editor’s note: Responses were lightly edited for length and clarity.
Question: What have been the organization’s main priorities for 2025, and how are those priorities changing for the second half of the year?
Dr. Sami Webb: In 2025, our main focuses have really been building out our strong infrastructure and systems. We want to be able to provide those support services to our doctors so they can really focus on patient care, providing clinical excellence and a great patient experience. If our doctors can do that, that means our practices will grow. We spent a couple of years laying that foundation and getting those systems in place, so we are set and ready to go. I think for the rest of the year, our focus hasn’t really changed. We’re really focused on that organic growth piece as well as continuing to strengthen those internal systems. We’re ready to expand, and we’re looking for those great partners who fit our values and our culture, and want to be great growth partners and great clinicians for our company.
Q: How would you describe your company’s growth so far this year?
SW: This last acquisition was a great one for us because it’s a really good partner that fits our model. There are eight locations in Virginia, and we’re super excited to have Dr. Beecroft join us. We do have a large pipeline of practices in which we are brought opportunities from brokers consistently. We say no to a lot of those opportunities, maybe more than we say yes, because we are really trying to be intentional and disciplined in our approach. We do not want to overpay, get ahead of ourselves and grow just to expand. We’re really trying to grow in a responsible way and in the right financial manner so we can be a sustainable company that can stand the test of time and leave that legacy that all of us at Epic4 talk about. We really want our practices and our companies to survive, so it’s all about that legacy piece. We are very cautious in our deal structures and are looking for the right partners that want to grow with us. We’re not looking for those doctors who just want a big payout and then walk away. 2024 was a down year in orthodontics in general, maybe in pediatric dentistry as well, and we’re seeing that improving in 2025, so I do think this is still going to be a great year for growth, and that we’re going to finish this year very strong.
John Pelikan: That mission and values fit is absolutely paramount. We could acquire 10, 15, 20 practices, but if that fit is not right, the culture is not right, [and] if we don’t find those doctors in the prime of their career who are hungry to grow their practices, then it’s not going to work out from a long-term perspective. We’re really in this for the long run and wanting to grow this and turn it into a world class institution.
Q: What are some of the qualities in a dental practice that signal it is not a good deal for your DSO?
SW: This is my opinion, but there are a lot of doctors who wait too long to figure out what their exit strategy is, so they are ready to sell at the age of 65 and just want to walk away. That is not the type of practice we’re looking for because we need to have great doctors who are engaged and who want to be a part of the company. So, if anything, we’re looking for doctors who are really thinking ahead on their exit strategy, who are still growing, and maybe are ready to bring an associate to take over. Those single-doctor practices where the doctor may be wanting to retire are probably not the best fit for us.
JP: As far as acquisitions go, we would rather miss out because, as Dr. Webb said, a ton of brokers bring us transactions. We’d rather maintain that prudent focus, not just growing for the sake of growing. We don’t want to go out and pay a giant price for a company to win in a competitive situation. There’s no shortage of deal flow. For us, it’s finding those right people, especially in the right areas. We want to be mindful as we approach acquisitions that they’re in areas that are also going to be able to continuously grow and support a growing practice as well.
SW: I think we also need to focus on, not just top line growth, but also increasing our margins, our EBITDA, or bottom line growth, if you will. That’s where a lot of companies miss, and that’s one of our large focuses this year, is focusing on those margins. We have a lot of equity partners in our company, and we feel it’s our obligation to protect those partners’ equity in this company and be a sustainable company long term, so we take that very seriously.
Q: Many DSOs went on what many executives refer to as a “buying spree” during the last couple of years that resulted in some financial challenges later on. What are some of the risks associated with this kind of activity?
SW: What happens in a lot of situations is that everybody’s looking for the largest payout, right? Somebody might overpay, and maybe this doctor has promised to grow, but what really happens, and it’s human nature, is that these doctors get a large payout and they let their foot off the gas, and pretty soon you start to see the decline. I think it happens all too often. That goes back to why we’re looking for the right partners, because it’s really hard to recover from something like that. If that doctor has checked out, let their foot off the gas, even if they bring somebody in, are they going to be there to really mentor that doctor and to continue to try to grow that practice?
We understand there are going to be doctors toward the later stages of their career, and it’s okay if they’re tired or burnt out and they need to step back, but we have to have somebody else ready to come in. The difference at Epic4 is that we really focus on that doctor piece, and being there for our doctors and bringing in quality partner doctors. That’s why we have set aside a portion of our company to give shares to these doctors who come into our company as associates or partners, [and] they don’t have to buy into the company. This is a true gift because we want to have quality doctors. We want this to be their forever home. We want them to stay in these practices. We want them to provide quality care.
One of the biggest problems in our industry is the revolving door of doctors, where in some of these DSOs, you have a doctor come for two years, they leave, and you have this cycle of doctors coming and going. That does not provide great care to the patients … The last thing any of us want to see is this deep decline in patient care. We’re all about legacy, and when those kinds of things happen, pretty soon, everything you work so hard to build goes away. This is really about maintaining that legacy and having quality doctors at the chair who are there for the long haul.
We have a responsibility to our profession and to the future orthodontists or pediatric dentists to come. The opportunities that I once had are no longer there. These doctors are faced with huge student loans [and] financial challenges. They still want to be an owner and a company, but they may not have the capital to do so. All of Epic4 feels like this is our responsibility. We can’t stop what’s happening in our industry, but what we can do is try to make it better and provide a home for these future [doctors], and still try to provide for them.
JP: One of the biggest risks facing some of those DSOs is leverage. Back three, four or five years ago, when rates were really low, many DSOs partnered with private equity and for a ton of leverage — 6, 7, 8, 9 times EBITDA on their practices. When you’re that levered, any little fluctuation to the business can cause great risk and really eliminate your ability to service that debt and grow. From our perspective, we have really low leverage. Again, it just gets back to being mindful about growth. That’s why I think we’re really set up for a tremendous amount of success over the coming years because we didn’t get out over our skis over the last several years. That’s going to be a great advantage for us as we look to expand over the next few years.
