This article was written by TUSK Practice Sales and shared on DDSmatch Academy with permission.
Dentists often find themselves approached by Dental Service Organizations (DSOs) or Private Equity Groups (PEGs) looking to acquire their practices when they’re least expecting it. These groups have extensive, highly skilled business development teams whose primary goal is to buy your practice at discounted terms for their investors and current doctor partners in order to create a meaningful return. They typically initiate contact through direct outreach methods such as email, direct mail, phone calls, or unsolicited offers. More cunningly, they may use warm introductions from existing doctor partners or sales representatives who have established relationships with the target practice. DSOs and PEGs allocate substantial budgets to incentivize these intermediaries, who need only to set up a conversation to earn their compensation. At DDSmatch, we’re committed to making sure dentists enter the practice sale process fully informed. TUSK Practice Sales put together this breakdown of why unrepresented sellers consistently leave money on the table — and what to do instead.
Many practice owners initially engage with DSOs or PEGs out of curiosity, wanting to “test the waters” without serious intent to sell. However, entering into such discussions about selling your dental practice without preparation is akin to playing chess with a Grandmaster. Just as dentists spend years perfecting their craft, these business development teams are masters of negotiation and sales tactics.
Should I Take An Unsolicited Offer from a DSO?
DSOs and PEGs prefer to approach dentists directly, offering to evaluate their EBITDA and practice value. This strategy allows them to control the narrative, the financial information, and the overall process. By keeping the seller uninformed about other market opportunities and maintaining full control of the process, they position themselves advantageously in negotiations.
These buyers pride themselves on the number of deals closed through direct outreach. These transactions often result in the seller accepting a price well below market value, because they didn’t have to compete with other buyers and negotiate with a skilled broker. The buyer does an exceptional job at making the seller feel as if they are getting a great deal, but it’s all a part of the plan. While this is advantageous for the buyers, it represents a significant loss of opportunity for the seller. This doesn’t make them a “bad partner,” it’s just their way of creating additional value for their group. At TUSK Practice Sales, we routinely work alongside dentists to increase their unsolicited offers by 40% and bring an aver
Understanding Information Asymmetry in a Dental Practice Sale
In any transaction, information asymmetry exists when one party possesses more or better information than the other. When DSOs express interest in your practice, they ask numerous questions under the guise of understanding your business and journey. In reality, they’re aiming to reduce their information gap to gain a comprehensive understanding of your practice. This process involves gathering detailed financial and operational data, which they use to craft an offer that appears attractive but ultimately benefits them more than you.
Sellers often lack critical information about the buyer, including:
- What is the quality of the DSO’s balance sheet?
- What is the equity offered in my DSO offer?
- What would other buyers pay for my dental practice?
- How do current partners like working in the DSO?
- What is the likelihood they re-trade my deal?
This imbalance allows buyers to make offers that maximize their return on investment at the seller’s expense.
Playing by Their Rules: How DSOs Sell Their Own Businesses
When a PEG-owned DSO seeks to sell, they’re not accepting the first unsolicited offer they receive. With over 100 PE-backed groups in the U.S., none would consider such an offer. They understand the importance of a competitive, market-driven process to maximize their investment’s value. They employ M&A advisors or investment bankers to:
- Prepare their business for sale
- Develop a compelling narrative for buyers
- Drive a competitive process
These advisors conduct the necessary diligence, align the sellers, and prepare them for the rigorous questions buyers will pose.
Should I Hire A Dental Broker To Sell My Practice?
The short answer: Yes, you should hire a dental broker to ensure you’re maximizing the value and the terms of your sale. As brokers, we know we’re not skilled at placing a crown or doing any dental procedure. A dedicated dental practice broker is skilled at aligning your financial and operational goals in a sale with the right partner. Brokers will:
- Give you an accurate dental practice valuation based on a multiple of EBITDA
- Prepare your practice for market
- Drive a competitive bidding process by bringing several buyers to the table
- Negotiate the terms of your sale to be the most financially beneficial
DSOs recognize the value of brokers and use them to maximize deal value when they sell, making unrepresented selling doctors an easy target for DSOs to undermine the true value of their practice.
Final Thoughts: There Are No Shortcuts in Selling Your Dental Practice
While it may be tempting to engage in direct discussions with DSOs or PEGs about selling your dental practice, doing so without professional guidance can result in significant value loss. Engaging an experienced M&A advisor ensures that you navigate the sale process strategically, maximizing the value of your life’s work and leaving no stone unturned. Remember, there are no shortcuts in the sale of your dental practice.
Frequently Asked Questions
How do I know if a DSO’s offer for my dental practice is fair?
To understand whether a DSO offer is “fair,” owners need to have an unbiased dental practice valuation conducted on their practice. A valuation will inform you what your dental practice is worth and can help you understand what selling at the top of the market could look like. When dentists enter into a competitive bidding process with multiple buyers, that is where the enterprise value of the sale can increase.
How does a competitive sale process increase the value of my dental practice?
A competitive process forces buyers to put their best terms forward because they know other qualified groups are at the table. Without that dynamic, the buyer sets the price, controls the timeline, and structures the deal to maximize their return. TUSK Practice Sales leverages it’s network of over 200 buyers to ensure dentists are able to see the full spectrum of buyers.
What information am I missing when a DSO approaches me directly?
When a DSO or private equity group initiates contact, they ask detailed questions about your financials, operations, patient volume, and personal timeline. They are reducing their information gap. Meanwhile, you typically know very little about them: the quality of their balance sheet, how current partners feel about working inside the organization, whether they have a track record of re-trading deals during due diligence, and what the equity component of their offer is actually worth. This information asymmetry gives the buyer a structural advantage. A dedicated sell-side advisor levels the playing field.
About The Author
Connor Jorgensen | Director, TUSK Practice Sales
Connor Jorgensen has over a decade of experience in the dental industry focused on growth strategies and value creation. Most recently, he was the Director of Business Development at a national DSO focused on organizational growth. He earned his B.S. in Marketing from the Ivy School of Business at Iowa State University.
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