dykema conference takeaways

healthcare services transactions

The HCA Healthcare team attended the Dykema DSO conference last week in Colorado. We have identified the following key themes and observations for the industry and DSO M&A market:

General DSO Industry Trends and Observations

Industry leaders remain positive about the growth of the overall dental market and DSO growth and demand remains strong; specifically, Steve Thorne at Pacific Dental stated 2023 is the best year in the Company’s history.
The industry can do more to create awareness with politicians and other regulatory bodies that oral health is essential in supporting overall health, which should drive more volume and better reimbursements.
While leaders were optimistic about the growth and future of the industry, they were also realistic that there are current challenges around costs and staffing given the inflationary environment.
Keys to managing through this are investments in technology and providing employee flexibility.

State of DSO M&A Market and Current Themes

A lot of runway/white space left for consolidation with estimates of 80% of industry ending up as DSOs.
Same store sales growth and the concept of a “Super GP” practice are gaining a lot of attention with investors and viewed as a lever to drive topline and offset the current cost environment.
The current macro environment created from rising interest rates and inflation is creating a narrower fairway for acquirers looking at potential targets and targets need to be strong operators.
Valuations for mid-market DSOs holding relatively steady with transactions likely having more structure.

These are just a limited few of the observations and themes we witnessed as participants, and we would love to set up a time to discuss additional insights and perspectives and assist you in ensuring an optimal outcome for your practice.

For more information or questions, please contact our Healthcare Services team:

Paul Kacik, Managing Director: pkacik@hexagoncapitalalliance.com

Brad Erhart, Director: berhart@hexagoncapitalalliance.com

Daren Oddenino, Director: doddenino@hexagoncapitalalliance.com

dental services dykema conference

dental industry

healthcare services transactions

As we enter the middle stage of the DSO consolidation across the U.S., we are seeing continued strategic and investor interest in the large and growing market as it approaches $200 billion by 2027.
Growth drivers include:
- Increasing coverage and financing options for dental services
- Pediatric and Medicaid reimbursement rates are improving
- Increasing access to care through growing number of practicing dentists
- Aging population requiring more frequent care
As the market continues to consolidate and mature, we are seeing investors place an increasing emphasis on differentiation in the form of specialty services and service extensions which leverage operators retail expertise. Further, we are witnessing operational rationalization occurring as consolidated entities streamline systems and improve automation to drive profitability. The acyclical demand and resiliency of the sector coupled with the current interest rate environment is driving exceptional private equity add-on transaction activity.
Strategics and private equity groups see positive macro tailwinds for the foreseeable future which has contributed to the strong transaction activity with 200 M&A transactions completed in 2021 and 2022 and has led 2023 to a strong start. With fragmentation still present in the market, we see a long runway for the consolidation play to continue. We also see a more favorable reimbursement profile relative to other PPM sectors, which helps prop up activity relative to those other sectors.