By Mark Lee
Strategic Advisor – Healthcare
The mergers and acquisitions market is heating up for dental practices, cosmetic surgeons, pharmacies and ancillary businesses as the consolidation trend continues in healthcare.
Mergers of dental and cosmetic surgery practices have been a popular way for doctors and dentists to join forces to cut costs, drive efficiencies and grow patient loads and profits.
M&A in healthcare and dentistry have been driven, in part, by the Affordable Care Act, a federal law passed in 2010, which has brought more insured patients into the sector.
Healthcare changes in recent years have put more pressure on practices to achieve cost efficiencies due to lower reimbursements from Medicare, Medicaid and private insurers.
Private equity interest strong
Private equity firms have been active in the space since the passage of the ACA, buying up and then expanding regional and national dental and healthcare practices. Whether this will continue remains to be seen.
Last year, private equity firm Gryphon Investors joined forces with dental industry veterans Steven Bilt and Bradley Schmidt to form OneSmile, a dental services organization focused on acquiring dental practices in the West.
Also last year, New York PE firm Bregal Partners joined forces with Florida-based Dental Partners, a dentistry practice management company, to acquire general dentistry practices in the Southeast, Texas and Midwest.
Smaller players deciding to sell
Smaller mergers and acquisitions are also happening with greater regularity.
Retiring dentists are a key driver in dentistry M&A activity as they decide to exit the space rather than face expensive upgrades in technology. Technology is driving changes across a broad swath of areas, including patient care, practice management and insurance reimbursements.
It’s becoming more common, for example, for insurers to require that a practice meet certain quality of care measures or face a reduction in reimbursements. Meeting those quality measures typically requires an investment in technology to manage the tracking required to prove that quality measures were met.
For older physicians and dentists, the many changes in the industry — from the ACA to new regulations to lower reimbursements — have prompted them to sell sooner rather than later.
Conclusions
Because cosmetic treatments such as teeth whitening have become so commonplace, the demand for dentists and cosmetic surgeons in the United States is robust.
The interest in these practices for sale should, as a result, remain strong due to the future opportunity for growth.
The Bureau of Labor Statistics predicts employment growth of 18 percent between 2014 and 2024 for the practice of dentistry, with 23,300 new openings for dentists.
U.S. News & World Report ranks dentist as the No. 2 best job of 100 best jobs due to its comfortable salary, low unemployment rate and work-life balance. Orthodontist is first, and oral and maxillofacial surgeons are No. 10.
Capital Alliance Corporation is a Dallas-based investment banking firm with an extensive international reach and a 40-year history of providing trustworthy advice to private company shareholders who want to sell their businesses. Our team has deep operational and M&A experience across many sectors, including healthcare.
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