Q3 2023 Dental Services Update

Q3 2023 Dental Services Update

Following an active Q2 with four platform-level transactions, Q3-23 produced fewer notable partnerships. Large, well-capitalized players such as DCA and Heartland continued normal acquisition activity, while mid-sized DSOs executed on strategic initiatives including expansion into new states, rebranding initiatives, and de novo clinic openings.

In the last 18 months, the dental sector has experienced pressure from increasing labor costs and interest rates, which primarily impacted groups with significant debt utilization operating in competitive labor markets. Despite these factors, investor interest remains strong due to core tailwinds such as fragmentation and increasing patient demand. In Q2, most large transactions were led by new investors, in comparison to recent years in which existing DSOs with strong balance sheets were consistently competitive bidders for premium assets. Given the market momentum established in Q2, Provident’s expects many mid-sized DSOs to transact in the near term, primarily with new investors.

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