David C. Branch Featured in Group Dentistry Now’s Updated 2020 Predictions from Dental Support Industry Thought-Leaders

Sept. 9, 2020 | Read the original article

2019 was one of the most active and exciting years in the DSO segment of the dental industry. In early February, we published 2019 Recap & 2020 Predictions from 18 Dental Support Industry Thought-Leaders.  Then COVID-19 hit. And it hit dentistry hard. Now that the DSO industry has started its recovery, we are revisiting those thought leaders for an update on their predictions for 2020 and beyond. Below are their thoughts as we all continue to navigate these unprecedented times.

David Branch, Principal at Viper Equity Partners

So, the big question is where dentistry stands today after a three-month shut down, or not, of the industry. DSOs handled the pandemic in a very organized and successful manner. Staff was furloughed, communication with patients was brisk and reopening strategies were put in place and executed with precision. The industry is strong and hyper-organized and came out of the haze proving that dental consolidation is here to stay.

One major observable change in the buying appetite of DSOs has been the size of the practices they look to purchase. Small, overpriced offices proved to be problematic in the shutdown, a lesson that needed to be learned. We are seeing high demand for practices in the $2 to $3 million range with eight plus operatories and two providers becoming the new norm on the smaller side. Medicaid remains very unfavorable and geography has really become a focal point. Basically, from a business standpoint the buying side of the industry has really matured.

The market is very active with multiples still in the 5 to 7x range of EBITDA, the same as they were last winter. Buyers are back in the market and moving aggressively to get deals under LOI and closed by the end of 2020. This July was our busiest month in terms of deals going under LOI in our 11 years in business. The markets are bloated with capital, and PE firms want to get the money on the street. Well-positioned offices have an amazing opportunity to join a DSO right now and should not doubt that the rest of the year will be anything but a positive trend in industry growth. What we want to communicate to everyone is that there is no reason to think that the deal side of the industry has been hurt when in fact, it’s more active now than it was a year ago.

We also have seen a huge wave of sellers coming to market. Many of these are the younger doctors we predicted would be abundant in 2020. Now more than ever it makes sense to be part of a large organization, to take some chips off the table and have a deep-pocketed partner on your side in case we experience another situation like this year’s. Sellers can expect reasonable hold backs by buyers to let numbers reset. They should also expect caution as buyers evaluate present numbers, taking into consideration the recent spikes after reopening as temporary factors while volume works back into a normal pattern. All in all, we stand on our forecast of 2020 being a tremendous year for dental consolidation.