In the current dental market, DSOs (Dental Support Organizations) have shifted their acquisition strategies to mitigate financial exposure, a move described as "de-risking". This shift has significant implications for dentists looking to sell their practices, particularly regarding how much cash they receive at the closing table.

The End of the "Heyday"

Previously, dental transitions were often "home runs" for sellers, who could expect to receive significantly more at closing than they would from a private buyer. During the "fast and furious" pre-COVID era, money was cheap, and private equity-backed groups were buying practices aggressively.

However, this market has undergone a correction:

• Vanishing FOMO: The "Fear Of Missing Out" that drove sellers has largely disappeared as market conditions have tightened.
• Expensive Capital: Money is no longer "cheap," causing private equity funding to dry up for many groups.
• Margin Pressures: Rising costs for hygienists and dental assistants have squeezed profit margins, making it harder for DSOs to service debt.

DSOs are now focusing on de-risking by pushing more of the transaction's financial risk onto the selling doctor.

• Decreased Cash at Closing: While sellers used to expect roughly 80% of the enterprise value in cash at closing, that figure has frequently dropped to between 50% and 60%.
• Rollover Equity Risks: A larger portion of the practice value is being held back as equity in the parent company. Attorneys note that some DSOs have recently informed partners that their internal shares currently have "zero value".
• Stock-Based Earn-Outs: Future payouts (earn-outs) that were previously paid in cash are now often being structured as 50% cash and 50% stock.
• Unique Holdbacks: Buyers are implementing new types of holdbacks, such as those for Accounts Receivable (AR), that were not common in previous years

Shifting Payout Structures

DSOs are now focusing on de-risking by pushing more of the transaction's financial risk onto the selling doctor.

• Decreased Cash at Closing: While sellers used to expect roughly 80% of the enterprise value in cash at closing, that figure has frequently dropped to between 50% and 60%.
• Rollover Equity Risks: A larger portion of the practice value is being held back as equity in the parent company. Attorneys note that some DSOs have recently informed partners that their internal shares currently have "zero value".
• Stock-Based Earn-Outs: Future payouts (earn-outs) that were previously paid in cash are now often being structured as 50% cash and 50% stock.
• Unique Holdbacks: Buyers are implementing new types of holdbacks, such as those for Accounts Receivable (AR), that were not common in previous years.

Increased Retention Requirements

To further de-risk the acquisition, DSOs are requiring sellers to stay on as providers for longer periods.

• Clinical Stability: A practice is considered a safer acquisition as long as the seller remains on-site to maintain patient and team stability.
• Longer Commitments: While three-year stay-on periods were standard, many DSOs now require five-year commitments from the selling doctor.
• Team Continuity: DSOs fear that if the owner leaves too soon, the dental team—and the patients—will follow.

The Private Buyer Advantage

Because DSOs are offering less cash upfront and requiring longer work commitments, the gap between corporate and private offers has narrowed. Private practice buyers now have a solid chance to compete by appealing to the seller's desire to protect their staff and legacy, offering a simpler transition compared to complex DSO equity structures.