Private equity investors continue to target DSOs due to their profitability and stability during economic downturns.
Barry Lyon, DDS, dental director for Main Street Children’s Dentistry and Orthodontics and Dental Care Alliance, recently spoke with Becker’s to discuss the benefits of private equity investments for DSOs.
Editor’s note: This Q&A is part of a weekly series featuring Dr. Lyon focused on topics in the dental industry and DSO field. The views expressed are those of Dr. Lyon and do not necessarily reflect those of Main Street Children’s Dentistry and Orthodontics or Dental Care Alliance.
This response was lightly edited for clarity and length.
Dr. Barry Lyon:
In the mid-to-late 1990s, DSOs began developing relationships with private equity firms. Heartland Dental, Smile Brands and Aspen Dental were among the earliest to become involved. Other than eye care, dentistry has probably been among the most active targets for outside investment. As PE investors increased their focus on healthcare, attention has been drawn by specialty dental practices such as endodontics, pediatric dentistry, periodontics, and oral and maxillofacial surgery. Investment significantly quickened around 2015 and grew dramatically from 2019-2021, becoming a major trend in healthcare services.
Private equity firms have energized the growth of DSOs because they recognized how stable, profitable and recession proof dentistry is. As a result, their added capital has led to even more growth and an increased utilization of the newest technologies. PE investment also allows DSOs to quickly acquire more practices, achieve economies of scale, hire more staff and renovate existing infrastructure.
The influx of private equity investments has led to certain concerns among industry watchdogs who fear the business model incentivizes profit over patient care. However, private equity groups and DSOs are keenly aware that survival and growth in the industry greatly depends on transparency and ethics.
