The Hidden Risk of Rolling Equity in a Dental Group Sale

The Second Payday That Never Came

A dentist, a rolled-equity deal, and the real numbers filed at Companies House that show why the second cheque so often never arrives.

Written by someone who worries about this sector, and who helps dental groups raise the money to grow.

Arun Mehra FCA — Founder and CEO, Samera. Co-owner, Neem Tree Dental.

Sanjay isn’t real. He’s a composite of a dozen dentists I’ve sat across the table from over the years, each one facing the same choice. But the group he joins in this story is real, and so are its numbers. Every figure below sits in the public domain, filed at Companies House for anyone to download. I’ve simply left the group’s name off the page.

Sanjay spent twenty years building his practice. One surgery became two. Two became five. He knew his patients by name, their kids, their weddings, the nervous ones who only came in at all because they trusted him. Fourteen people on the payroll, most of them with him for years. He’d sent the corporates packing twice, and he was proud of that, the way you’re proud of something you built with your own hands.

Then he got tired. His fifties arrived, and with them the aching back, the HR headaches, the NHS paperwork, and the creeping sense that the fun had drained out of the parts of the job he never trained for. One day, a group came calling with a number he had never seen written next to his own name.

It wasn’t all cash. part cash, part shares in the group. “Roll some equity,” they told him. “Stay on, keep doing the dentistry you love, and when we sell the whole thing in a few years, you get a second payday. A bigger one. We’re all on the same side now.”

He said yes. Of course he did. Wouldn’t you?

What Sanjay Didn’t Know

The group Sanjay joined ran 59 practices, most of them good ones. Last year they brought in £68.4m between them, up 13 percent on the year before. At the surgery level, that looks like a genuinely growing, well-run business. Read the first two pages of the accounts and you’d nod along, assuming everything was fine.

Then you reach the debt, and the floor gives way.

One Real UK Group, From Its Own Filed Accounts

Look at what that table is telling you. The group has £116.2m of borrowings falling due against just £8m of profit, about fourteen times over. Now look at what most of that debt actually is. £69.8m of loan notes charge up to 25 percent a year, and nobody is paying that interest in cash. It simply piles on top of what’s already owed. More than half of that pile, £35.1m, is now interest sitting on top of interest. Meanwhile the group is £64.6m in the hole, and that hole grew by nearly £12m in a single year.

Two Pieces of Jargon, Explained Once

That “roll-up” loan is what the city calls PIK, short for payment-in-kind. Nobody pays the interest. It gets bolted onto the debt instead, like a credit card sitting in a drawer that nobody ever touches, growing at up to 25 percent a year.

Negative equity simply means the group owes more than it owns, in this case £64.6m more. You know the feeling from houses. A £300,000 home with a £360,000 mortgage is underwater. This group is underwater by the price of a row of practices and still sinking.

In plain terms, the practices earn just about enough to cover the interest the group actually pays out in cash, roughly £4m against £4.7m of cash coming in from the business. Just about. The rest of the interest isn’t being paid at all. It sits quietly on the debt pile, waiting for the day the group is sold.

I want to be completely straight about where it comes from. I took every figure in that table from this group’s own accounts, filed at Companies House for the year to 31 March 2025. Anyone can download them. I’ve left the name off the page on purpose, but it took me ten minutes to find, and it would take you the same.

This group isn’t a freak case either. Another group I reviewed, younger and earlier on the same road, had just slipped into negative equity for the first time, propped up by a £60m private-credit facility, and had quietly re-filed its accounts within weeks of first submitting them. It’s the same illness, just diagnosed sooner. Across the sector, the pattern repeats. This is not one bad apple.

How a Story Like This Ends

So how does Sanjay’s story end? The mechanics are brutally simple. Those roll-up loan notes fall due for repayment on exit, meaning when the group is eventually sold, and they sit above ordinary shares in the queue. On top of them sits a senior bank loan of around £46m that must be repaid or refinanced by 2027. When that day arrives, the debt gets paid first, every penny of it. Only after that does anyone further down the queue see anything at all, including the dentists who took shares instead of cash. After £116m of borrowings on a business worth a fraction of that, “a thing” is very often nothing.

If that sounds far-fetched, it’s already happened. In the United States, which tends to run two or three years ahead of the UK on this trend, the lenders to a large dental group did exactly this in early 2026. They converted their debt into ownership and pushed the old owners out. The dentists who’d taken shares were wiped out. Different company, same ending, just a few years ahead of us on the road.

For a dentist like Sanjay, the second payday, the entire reason he took shares instead of cash, is the first thing to vanish. He’d have sold the practice he spent twenty years building for a fraction of its worth, plus a promise sitting right at the back of the queue.

That’s the part that should make every practice owner angry. Sanjay did nothing wrong. His practice still runs well, his team still turns up, his patients still trust him. None of that was ever the problem. The debt was the problem, and nobody ever sat him down to show it to him.

You’re Somewhere in This Story

I tell you about Sanjay because you’re somewhere in this story too, and you still get to choose how it ends.

Maybe you’re Sanjay before the knock at the door. A good practice, a good life, and one day a stranger arrives with a big number and a warm handshake. If that’s you, ask the one question that matters: what do they know that I don’t? They buy practices for a living. You’ll sell one, once. They’ve run the numbers harder than you ever have, and they’re offering you a price because they believe it’s worth more than that. The gap between the two numbers is your money.

Or maybe you’re Sanjay a couple of years in, already inside a group, with a bad feeling and a debt you don’t fully understand. If that’s you, you don’t have to wait for the final chapter. There are things you can do right now.

What to Do About It

If You’re Already Inside a Group

• Ask to see the whole debt. All of it, including the roll-up loan notes, and when each part falls due. Be wary of any figure you’re not allowed to look at.
• Push to pay down the roll-up loan first. It’s the one growing quietly at up to 25 percent. If profit can be directed anywhere, direct it there first.
• Get proper advice on where your shares actually sit in the structure. If they sit behind a wall of debt, and they almost certainly do, you want to know that today, not on the day the lenders arrive.

If You Still Own Your Practice and You’re Thinking of Selling

• There’s no shame in selling. If you’re genuinely done, take the cheque and go with my blessing. That’s a good ending.
• Be very wary of taking shares instead of cash. “Aligning our interests” can quietly mean “sharing our downside.” You’d be last in the queue, behind every pound of debt.
• Ask what they’ve seen in the numbers that makes them confident this price still works for them. The honest answer is usually that there’s more life left in your practice than you think.

What He Really Lost

Debt itself isn’t the villain here. A mortgage on your surgery, finance on a scanner, that’s debt doing its job, and I’d recommend it to anyone. Used well, it’s one of the best tools a good owner has. Charlie Munger, Warren Buffett’s long-time business partner, once said there are only really three ways a clever person goes broke, and the one that counts is leverage, meaning borrowed money. Used badly, it’s one of the very few things that can take everything away quietly, while the dentistry carries on looking perfect.

What Sanjay would lose isn’t only money. It’s the thing he built with his own hands, handed over to people who only ever saw it as a line on a spreadsheet. You don’t have to be in that story. You know your patients, your team, and the town you’ve spent twenty years serving. The confidence you need to back yourself, you earned the day you signed the lease.

Arun Mehra

If you’re weighing up an offer, thinking about selling, or trying to work out how much debt your group can safely carry, that’s a conversation we have every week at Samera. This article is general comment, not financial advice for any business.

Frequently Asked Questions

A few questions I get asked most often when this piece does the rounds. Straight answers, no jargon left unexplained.

What does “rolling equity” mean when selling a dental practice?

It means taking part of your sale price in shares of the buying group instead of cash. The pitch is a bigger second payday when the group eventually sells. The catch is that those shares sit behind the group’s debt in the queue, so they only pay out if there’s anything left once every lender has been repaid in full.

What is a PIK loan or roll-up loan note?

PIK stands for payment-in-kind. Instead of the interest being paid out in cash each year, it gets added to the balance owed. Left alone, that balance can grow fast, sometimes at up to 25 percent a year, because nobody is actually paying it down as it grows.

What does negative equity mean for a company?

It means the company owes more than it owns, the same way a house is underwater when its mortgage is bigger than its value. For a dental group, that’s a signal that if the business were sold today, shareholders further down the queue could be left with nothing once the debt is cleared.

How can I check the financial health of a dental group before selling to them?

Pull their accounts from Companies House. It’s free and takes ten minutes. Compare total borrowings against EBITDA, look for PIK or roll-up loan notes and their interest rates, and check whether shareholder equity is positive or negative, and which direction it’s moving.

Should I take cash or shares when selling my dental practice?

There’s no single right answer, but shares in a buying group almost always rank behind every pound of that group’s debt. Before you accept shares over cash, ask to see the full debt structure, when it falls due, and exactly where your shares sit in the queue if it all goes wrong.

Where the Figures Come From

• The group’s numbers, £68.4m turnover, £8.0m EBITDA, £116.2m long-term borrowings (around 14x), £69.8m loan notes at up to 25% (£35.1m of it rolled-up interest), negative equity of £64.6m. Source: the group’s own accounts, filed at Companies House, year to 31 March 2025. Name withheld here by choice.
• A second UK group, first-time negative equity, a £60m private-credit facility, accounts re-filed within weeks. Source: Companies House filings, year to 31 March 2025.
• US lenders converting their debt into ownership of a large dental group and wiping the equity holders, early 2026. Source: 9fin, February 2026.
• “Liquor, ladies and leverage,” attributed to Charlie Munger, Warren Buffett’s point that leverage is the real danger. Source: Warren Buffett, CNBC (2018).