Investing in Dental Practices When the Easy Money Is Gone

This is written for people deploying capital into dentistry – funds, family offices, trade consolidators and the bankers who lend to them – and it is meant to be useful rather than flattering. My angle is unusual: I am a Chartered Accountant who has advised hundreds of dental practices for over two decades, and I also own practices, with my wife, Dr Smita Mehra.

I have underwritten deals, built the models, and then lived with the consequences on the surgery floor. So I have watched this cycle from both the spreadsheet and from being an owner.

In fairness, you should know my biases up front. I run a business that serves dental practices and sells technology into the sector, so I have an interest in a healthy independent market.

I have no fund to place and nothing to sell you here.

What follows is the view I would want if the capital at risk were my own.

The headline is simple, and I think it is now beyond reasonable dispute: the easy trade in dental consolidation is over.

That is not the same as saying the sector is uninvestable.

It emphatically is not. But the returns that arrived almost for free between 2019 and 2021 – the ones manufactured by cheap leverage and rising multiples – have gone, and they are not coming back this cycle.

From here, dentistry is an operator’s game, not a financier’s game. There is still very good money to be made. It will simply be made by a different kind of investor, doing a different kind of work, and underwriting to a different kind of outcome.

What actually drove the 2019–21 returns

It is worth being honest about why the first wave worked so spectacularly, because most of it was macro, not magic. Three forces did the heavy lifting, and an investor needs to know how much of each is still available.

• Near-free debt. The Bank of England base rate was cut to 0.1% in 2020 – the lowest in its 300-year history. Leverage was abundant and almost costless, which flattered equity returns on every deal.
• Multiple arbitrage. Buy a single practice at, say, 4–6x earnings, bolt it onto a “platform” valued in the low-to-mid teens, and the gap between the two multiples became instant, unrealised value – before a single operational improvement was made.
• A reliable next buyer. The exit thesis was that a larger fund, a strategic, or the public markets would always pay more for scale. The whole edifice assumed liquidity at the top.

Each of those three has now weakened or reversed. Debt is dear. Multiple expansion has turned into multiple compression. And the next buyer has, in many cases, simply stopped showing up. Strip the macro tailwind away and you are left with the underlying business – which is exactly where a disciplined investor should have been looking all along.

The leading indicator: read the US end-state, then underwrite to it

The United States is the most mature DSO market on earth – roughly a quarter of its 200,000-odd practices are corporate-affiliated, and 27 of the top 30 groups are private-equity owned. It is, in effect, a live preview of where saturation leads. The current picture there is sobering:

• Market leaders rated as junk. Heartland, Aspen and Smile Brands carry sub-investment-grade ratings (B/Caa from Moody’s). Historically, close to 28% of B-rated borrowers default within a decade. The risk is concentrated in the largest, most-levered platforms – not the fringes.
• A jammed exit market. Over two years, more than 40 DSOs were brought to market and fewer than 10 sold. Liquidity at the top – the entire exit thesis – has thinned dramatically.
• Failing recapitalisations and debt-for-equity. Large groups that planned to refinance cannot on acceptable terms. In early 2026, lenders to Dental Care Alliance, a top-tier US DSO, moved to convert debt into equity and take control – wiping or heavily diluting existing equity, including any rolled by selling dentists.
• Compressed entry multiples. Tuck-in practices now change hands at roughly 3–6x EBITDA – a far cry from the headline platform multiples of the peak.

And there is a precedent worth keeping on the desk.

In the late 1990s, private equity rolled up physicians’ practices into listed “physician practice management” companies on the same logic. By 2002, eight of the ten largest had filed for bankruptcy. The lesson is not that consolidation cannot work – it is that consolidation built primarily on leverage and multiple expansion, rather than operational substance, has a habit of ending the same way.

Europe got there first – and priced in some hard lessons

Continental Europe is not behind the US so much as scarred by its own earlier experiments, several of which an investor should treat as case studies in tail risk.

Spain ran an aggressive, finance-led, low-cost model and watched it implode: iDental, Funnydent, Vitaldent and Dentix between them left an estimated 400,000 patients with unfinished treatment, many still repaying personal loans for work never completed. Dentix – 350-plus clinics, 3,000 staff – collapsed into insolvency in 2020 and publicly blamed its backer, KKR, for withdrawing a committed investment, leaving roughly €160m owed. The clinical and reputational risk in a thin-margin, finance-dependent model is not theoretical.

France offers the same warning: Dentexia’s 2016 liquidation left around 2,300 patients, some seriously harmed, with a class action still live in 2025. The Council of European Dentists characterised the underlying model bluntly – underprice to win share, expand, then flip – which is worth remembering when a target’s growth looks too good for its pricing.

Germany is the regulatory risk made concrete. Dental “medical care centres” grew from around 25 to more than 600 in under three years, prompting a political backlash in which the federal health minister branded private-equity buyers “locust investors.” The harshest reform was diluted and then lapsed when the coalition collapsed in late 2024, but partial restrictions were enacted, and the direction of travel in Europe’s largest market is unmistakably hostile. Regulatory risk now has to be priced into any German thesis.

Italy and the Nordics illustrate the liquidity problem. DentalPro, Italy’s largest group, has passed from VAM to Summit Partners to BC Partners – held now for the best part of a decade. In an asset class underwritten on three-to-five-year holds, that is a stranded position, and the Nordics now show the longest average holding periods on the Continent. The high-water mark of pan-European consolidation – Colosseum’s 2021 acquisition of Curaeos, building a 620-clinic, eleven-country group – has not been followed by a comparable platform exit.

The honest counter-case: what still works

A thorough view has to give the bull case its due, because several parts of it are genuinely intact – and the prevailing gloom is creating entry points.

• Demand fundamentals are sound. Dentistry is a recurring-revenue, demographically supported, broadly non-cyclical service. The structural shift toward private and elective work – cosmetic, clear-aligner orthodontics, implants – is real and higher-margin, even if headline market growth is only low-single-digit (the UK practice market is around £7.6bn and growing roughly 1–3% a year).
• Fragmentation runway remains. Of roughly 12,200 UK practices, around 7,950 are still independent one-to-two-site operators and only about 2,200 sit within large groups. The theoretical consolidation runway has not closed – it has simply stopped being a free ride.
• Your entry basis is far better than 2021. Multiples have compressed and UK prices, after a 9.4% fall in 2024, stabilised with a modest rise in 2025. Buying quality at 6–9x is a fundamentally different proposition from buying it at mid-teens. The best vintages in private equity are almost always bought in the cautious years.
• Operational alpha is under-exploited. Because the first wave relied on financial engineering, surprisingly little hard operational value was actually created. Procurement, associate productivity and rota design, digital workflows, AI-assisted administration and pay reconciliation, and a deliberate shift in payer mix toward private all remain available as genuine margin levers for an owner who can operate.
• Capital is still present, and selectively re-engaging. There is record dry powder in private equity, European healthcare deal value rose sharply in 2025, and UK brokers report consolidators re-entering for quality private-led assets. The money has not left; it has become more selective – which is exactly the environment in which disciplined buyers outperform.

There is also a distinct distressed and secondary opportunity. As over-levered platforms restructure, well-capitalised operators will be able to acquire clinics, and even whole groups, at prices that finally reflect operating reality rather than peak optimism. For the patient buyer, someone else’s impaired roll-up is a pipeline.

The risks you must underwrite – in full

Set against that, the risk stack is heavier and more varied than the 2021 consensus assumed. A serious underwriting case has to address all of it:

• Cost and availability of debt. The base rate sits at 3.75%, down from a 5.25% peak but with inflation above 3% and no guarantee of further cuts. Deals underwritten on cheap leverage do not pencil at today’s cost of capital.
• Exit and liquidity risk. The single hardest question is now: who is your buyer, and at what multiple? If the answer relies on a larger fund paying up for scale, the US shows that assumption failing in real time.
• Labour – the real margin killer. A persistent dentist and hygienist shortage is driving associate-cost inflation and recruitment difficulty. In a people business, wage pressure, not interest rates, is often what actually compresses EBITDA.
• Regulatory and payer risk. Germany’s hostility to investor ownership, the dysfunctional UK NHS contract (which prompted even Bupa to hand back roughly 85 practices in 2023), and corporate-practice rules across jurisdictions all sit directly on the investment case.
• EBITDA quality. Vendor and platform EBITDA is frequently dressed with optimistic add-backs and normalisations. Underwrite the cash, not the adjusted figure, and stress the associate line hard.
• Clinical, reputational and patient-finance risk. Spain and France show how a thin-margin, volume-and-finance model can fail catastrophically, taking patients and reputation with it. Aggressive upselling and third-party patient lending are red flags, not growth.
• Integration and key-person risk. Value in dentistry walks out on two legs. Clinician retention, culture and genuine post-deal integration determine whether a group compounds or quietly decays.

What disciplined capital should actually do

Pulling it together, the stance that survives honest scrutiny looks like this:

• Underwrite to organic growth and margin – never to multiple expansion. If a deal only works because you assume a higher exit multiple, you do not have an investment; you have a wager on someone else’s balance sheet.
• Buy at a basis that works with modest leverage. Capital structure should be a tailwind you can live without, not the whole thesis.
• Back operators, and own the operating plan. Pay for, or build, real operational capability – procurement, workforce, technology, payer-mix – and prefer control where you intend to drive change.
• Lengthen the hold assumption. Model six-to-eight years, not three-to-five, and make sure the asset pays you to wait through cash generation rather than relying on a quick flip.
• Be the patient buyer in a buyer’s market. Favour quality private-led assets, pursue the distressed and secondary pipeline deliberately, and avoid becoming the exit for an impaired platform unless the price fully reflects it.

The bottom line

So here is the honest verdict, with all factors weighed. The phase that made nearly everyone in dental consolidation look clever – cheap debt, rising multiples, a willing next buyer – is finished, and a good deal of the capital deployed at the peak is now impaired and will spend years being worked out. To that extent, the celebration in parts of the UK and European market is badly mistimed; the cycle they are toasting has, in my view, already turned.

But “the easy money is over” is not the same as “leave.” It is a different game now: a lower-beta, operator-led, cash-and-margin game, played at sensible multiples in a market where demand is sound and the field of competing buyers has thinned. For an investor with genuine operating capability, the discipline to buy well, and the patience to hold, dentistry can still deliver strong, durable returns – arguably better risk-adjusted returns than the peak offered, precisely because you are buying in the cautious part of the cycle.

Just don’t underwrite a 2021 outcome with 2026 money. Bet on the business and your ability to run it – not on the next buyer’s appetite. And before every deal, ask the only question that really matters:

Sources

• Bank of England base rate history (0.1% Covid low; 5.25% peak Aug 2023; 3.75% held since Dec 2025) – Bank of England.
• US DSO structure: ~25% of ~200,000 practices DSO-affiliated; tuck-in multiples 3–6x EBITDA; 40+ DSOs marketed vs <10 closed over two years – Lincoln International.
• 27 of the top 30 US DSOs private-equity owned – Private Equity Stakeholder Project, 2021.
• Ratings of Heartland, Aspen, Smile Brands (B/Caa); ~28% ten-year B-rated default rate – Moody’s / S&P Global 2024 Default Study.
• Dental Care Alliance debt-for-equity / lender control – 9fin, Feb 2026.
• PPM collapse: 8 of 10 largest listed PPMs bankrupt by 2002 – SOLIC Capital / Dental Products Report.
• Spain – iDental, Funnydent, Vitaldent, Dentix collapses (~400,000 patients; Dentix €160m owed to KKR, insolvency 2020) – El Independiente / Público.
• France – Dentexia liquidation 2016 (~2,300 patients; class action live 2025) – Connexion France / Council of European Dentists.
• Germany – dental MVZ growth (25 to 600+); ‘locust investor’ reform diluted then lapsed after 2024 coalition collapse; partial restrictions enacted – Marwood Group / Pinsent Masons.
• Italy – DentalPro ownership chain (VAM → Summit 2015 → BC Partners 2017, still held); Colosseum/Curaeos 2021 – Lincoln International/Dental Tribune.
• PE dry powder (~$2.6tn), European healthcare deal-value rebound 2025, extended holding periods (~6.4 yrs) – Bain 2026 Global Healthcare PE Report / S&P Global / PwC.
• UK market structure (12,223 practices; ~7,955 independent, ~2,065 small/mid groups, ~2,203 corporate/large); 2024 deals 74% to independents, 15% to corporates; corporate offer share for NHS/mixed 8%→45% (H1’23–H1’25); prices −9.4% 2024 then +2.9% 2025 – Christie & Co.
• UK dental practices market ~£7.6bn, ~1–3% growth – IBISWorld, Mar 2026. Demand shift to private/elective; clear-aligner orthodontics fastest-growing – Mordor Intelligence.
• UK practice valuations c.6.5–9.5x EBITDA (2025) – Eclipse Corporate Finance.