Economic uncertainties and performance shortcomings have led some large-scale DSOs to fail at recapitalizing their capital structures, according to one dental industry consultant.
Stan Kinder, the founder and president at Everything DSO, recently spoke with Becker’s to discuss the trends he is following in the dental industry.
Editor’s note: Responses were lightly edited for length and clarity.
Question: What are you most excited about when it comes to dentistry right now, and is there anything that makes you nervous?
Stan Kinder: I think the exciting thing is on the technology side, the ability of artificial intelligence to bring efficiencies both to the back office business side of the practice, in terms of how practices communicate and interact with patients, as well as even into the clinical area in terms of diagnostic capabilities.
I also think it’s going to be interesting to see how the DSO market evolves over time. Everybody is anticipating that the interest rates are going to come down, and to see how that influences things. There have been a couple of failed recapitalization efforts from some fairly large-sized DSOs, and it’ll be interesting to see how that changes going forward.
Q: Do you have any insights you could share as to what might have led to those failed efforts?SK: A couple of things. I think they weren’t performing as well on the operational side … also recapitalizations had slowed across private equity, independent of industry sector. Private equity historically leverages their equity investments with debt, and obviously that’s gotten a lot more expensive over the last couple of years, so that’s changed their economic model. There’s also a little bit of anxiety around where the broader economy is going, the uncertainty around tariffs, whether or not there’s a pending recession, and how that might affect the dental consumer. There are a lot of things at play. Also, there’s been a little bit of a labor crisis in the profession since the pandemic. I saw a statistic recently that said that close to 70% of practices are actively recruiting for hygienists currently, and there’s no doubt that hygiene departments are a significant driver of the ability of general practices to be successful.
