In the last 60 days of 2021, Invisible Dental Support Organizations (IDSOs) have monetized over $4 billion in value for their physician partners and investors. This was in addition to $1.4 billion in the first 30 days of 2021 for a single IDSO. In 2022, tens of billions of dollars will be returned to physicians and investors as dozens more IDSOs and DSOs recapitalize or sell to larger investors. Some doctors and investors will earn returns of three to ten times or more on their equity in many of these transactions, some in less than three years.
Today, hundreds of IDSOs in all 50 states are eager to partner with dentists of every specialty. IDSOs buy 51% to 90% of a practice at record values for cash up front. Physicians retain ownership and continue to run their practices as owners—along with the physician’s brand, team, and strategy—for years or even decades. An IDSO partnership is not a short-term transition strategy, but rather a wealth creation partnership.
The rise in invisible DSO capital
The practices that invisible DSOs value the most
Physicians benefit from an IDSO partnership with the resources of a great silent partner to grow their practices better, faster, and more cost-effectively. Every IDSO is different and their support services vary widely. Most IDSOs will reduce physician administrative burdens and costs and provide superior marketing and recruitment, with some achieving higher reimbursement rates from payers. IDSOs act as silent partners and do not attempt to micromanage or homogenize the practices of their partners.
The majority of IDSOs only partner with general practitioners, but specialist IDSOs are growing exponentially. There are now a dozen IDSOs that partner only with oral and maxillofacial surgery (OMFS) practices and another 13 for orthodontics. Endo and perio also have multiple single-specialty IDSOs. Some of the fastest growing IDSOs are dental trifecta groups, which partner with pediatric, orthodontic, and OMFS practices that are in the same regions. Also expect to see several new implant-focused IDSOs.
The benefits are many
Physicians as young as 30 enter into IDSO partnerships. They may not want to work as employees for a branded DSO, but many are excited about the support of a partially owned firm. The potential to build generational wealth over time through their retained ownership with an IDSO partner can be very attractive.
Dental practice consolidation has been a lucrative and safe investment for over 30 years and is attracting new investors. Many IDSOs are backed by private equity (PE), family offices and small business investment firms, and some will go public in 2022. The world’s third-largest private equity firm, KKR, is owner of Heartland Dental, the largest DSO in the United States. , since 2018, and has helped Heartland add more than 400 firms in 2021. In August, Blackstone, the world’s largest private equity group with more than $650 billion in assets, entered a consolidation frenzy dentistry by acquiring Deca Dental. This has not gone unnoticed by the more than 3,000 other global investment firms. Luckily for doctors, the new capital is driving up practice values.
Most practices will receive interest from five and sometimes 10 or more qualified IDSOs through a well advised bidding process. Multiple bidders not only create significantly higher practice values, but allow physicians to meet many potential partners. Physicians should understand all of their options and choose the IDSO that best fits their vision for practice and with the greatest potential for equity. There are more enthusiastic IDSO partners than outstanding practice partnership opportunities. Leading physicians are in a very powerful position to partner with many qualified IDSOs.
Whether or not you are considering an IDSO partner, you need to understand the value of your practice in today’s market. Physicians can confidentially learn about the potential value of their practice in an IDSO transaction, at no cost or obligation.
Editor’s note: This article originally appeared in the March 2022 print edition of Dental economy magazine. Dentists in North America can take advantage of a free print subscription. Register here.