As the countdown to the US presidential election continues, with less than 30 days until candidates Donald Trump and Kamala Harris face off, many are watching closely. This election is viewed by many as one of the most significant in modern US history. There is growing speculation that dental mergers and acquisitions (M&A) may slow down until after the election. To gain insight into this topic, we spoke with Kyle Francis, founder and president of M&A advisory firm Professional Transition Strategies. He discussed how uncertainties surrounding new regulations and economic policies could affect dental M&A activity.
Market Sentiment And Election Results
We asked Mr. Francis about the potential impact of the election results on market sentiment and whether we might see a slowdown or acceleration in deals. He noted that the dental M&A market has shown resilience despite various challenges, including political cycles, inflation, rising interest rates, and even a pandemic. While some may speculate about a slowdown and use fear tactics to create urgency, Francis believes that the fundamental drivers of dental practice value remain strong.
According to data from his firm, there is no sign that M&A activity in dentistry is slowing due to the election year. In fact, research from Harvard Business Review indicates that we are currently at the peak of consolidation in the industry. This suggests that practice values and interest from private equity firms will remain stable for the next few years.
Francis anticipates continued robust activity in dental M&A throughout the election period and beyond. He emphasized that savvy investors and dental support organizations (DSOs) recognize the lasting value of quality dental practices. They are likely to maintain their acquisition strategies regardless of short-term political fluctuations.
Advice for Dental Practice Owners
When it comes to dental practice owners considering a transition, Francis offers consistent advice: focus on controllable factors. He encourages owners to build value in their practices through strong operations, excellent patient care, and effective team development.
These fundamentals drive practice value regardless of external circumstances.
He advises owners to start the sales process sooner rather than later.
This allows them to test the market and evaluate various strategies and buyers without feeling rushed. Engaging experienced M&A advisers can help owners understand their options and maximize their practice’s value. A well-run practice will always attract buyers, regardless of political conditions.
Impact on Small Practices vs. Larger DSOs
We also asked Francis about how the election outcome might affect small independent dental practices compared to larger DSOs regarding M&A opportunities. He explained that both individual buyers and larger DSOs have different financing structures that allow them to navigate challenging political and economic climates.
Individual buyers typically secure financing from banks, which have not shown any slowdown in lending. The amount banks are willing to lend to dental entrepreneurs remains consistent over time.
On the other hand, DSOs often rely on private equity funding, which gives them more flexibility than traditional bank financing. This enables them to offer more competitive prices for dental practices, including strategic deal structures that leverage unique financial opportunities.
Investors continue to invest heavily in the dental industry, indicating strong confidence in its attractiveness. For sellers considering options for selling their practices—whether to individual buyers or DSOs—now remains a favorable time.
Potential Tax Policies Affecting Transactions
We also discussed potential tax policies that could influence the valuation and structure of dental practice transactions.
Francis noted that tax policies are always evolving, presenting risks for practice owners. For example, there is a possibility that capital gains rates could increase over time since they have remained at historically low levels for over 20 years.
However, predicting such changes is challenging, as raising rates could provoke backlash from various industries and lobbyists. Francis advises practice owners to work closely with brokers, financial advisers, and tax professionals to structure transactions favorably under current laws. The core value of a dental practice lies in its ability to provide quality care and generate sustainable revenue—factors that remain constant despite tax policy fluctuations.
Economic Policies And Interest Rates
The upcoming election may influence economic policies as well. We asked how changes in interest rates or access to financing could affect the dental M&A landscape. Francis explained that the dental industry has demonstrated resilience through various economic cycles, including periods of fluctuating interest rates.
While changes like rate adjustments by the Federal Reserve can influence transition strategies, they rarely alter the fundamental attractiveness of quality dental practices for buyers. Low interest rates can sometimes accelerate deal activity; however, even during high-rate environments, interest in dental acquisitions remains strong.
Investors recognize that dental practices are stable and recession-resistant investments that can balance their portfolios.
Regardless of interest rate conditions, financing options remain available for well-structured deals involving quality practices. Practice owners should concentrate on maintaining strong operations and financial health to make their practices appealing acquisition targets in any economic climate.
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