The Practice Buyer's Corner - Random Musings from the Buy-Side
The Practice Buyer's Corner - Random Musings from the Buy-Side
The purpose of this blog is to share current, real world, experiences on the topics of practice valuation, practice transition, retirement planning, and building equity value - over time - in your dental practice.
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seanepp
seanepp

Built vs. Bought

Built vs. Bought

5/26/2026 9:20:51 AM   |   Comments: 0   |   Views: 36

You can function just fine without getting involved with a group (“DXO”) or private equity!


If you are not interested in pursuing an affiliation with a group practice - read no further - this note is not designed for you.  


If you are open to pursuing options with group practices there is one fundamental question that every business owner should be asking:

“Are you an operator or an opportunist?”

If the group can’t answer this quickly and concisely, it likely warrants further curiosity.  

Prepare for an awkward silence. Prepare for some tap dancing. Prepare for comparisons and rationalizations. Prepare to be nonplussed. Prepare to possibly even giggle.

Operators are healthcare businesses that are focused on building sustainable, durable, scalable patient care models.  They are designed to withstand market forces that might otherwise impair a more poorly designed or managed business.

Opportunists are just that.  They see a market opportunity and they want to exploit it.  They are trying to synchronize market movements for arbitrage opportunities.  This can work when the broader economy is doing OK and the capital markets are liquid.  This can also come to a screeching halt when consumer confidence shits the bed and capital costs are high.

There is nothing wrong with a profit motive and it tends to be their only “Why?”  If the only motivation in a healthcare business is to generate outsized profits or capital gains, you may be better off investing in anything except direct patient care.

Today, there is a broad cohort of opportunist dental groups who are likely one quarter away from defaulting on their credit agreements, if they haven’t already.   Unfortunately, the only way to cure lender defaults for most will be to a) sell their group to a larger, better capitalized strategic buyer, or b) incur a very expensive restructuring that sees existing ownership interests wiped out and the existing lenders becoming the new “owners."

It is nearly impossible for any group to earn/claw/operate their way out of this hole once they hit financial distress.  They are simply overleveraged and upside down on an asset that is running away from them operationally.

Private equity firms have a long-established track record of simply handing the keys over to the banks when these platforms go south. They know they are staring at investing good money after bad and typically opt to walk away instead.

Good luck, have fun, don’t die!

Best,

Sean

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