On today’s episode, we delve into the recent significant surge in interest rates and its repercussions on various sectors, notably dentistry. We discuss how, in times of low-interest rates pre-COVID and post-pandemic, private equity groups capitalized by leveraging businesses with debt. This strategy fueled the quick aggregation of dental practices. However, the current upswing in interest rates has put enterprises, particularly those supported by private equity, in a challenging position. Many of these firms are now re-evaluating their previous aggressive acquisition methods, shifting their focus from a pure aggregation model to an operation-centric model. This transition is evident in the increasing workout activities. Furthermore, we highlight a case of a private equity-backed regional DSO on the East Coast, where the lender's reduction in the debt to EBITDA multiple translated to a $30 million decrease in available debt funding. As the market evolves, our conversation underscores the importance for sellers and equity rollers to vet their buyers meticulously. This includes understanding the buyer's capital structure, debt setup, and operational history to safeguard the equity aspect of any transaction. Finally, we emphasize the need to distinguish between mere aggregators and genuine operators in the industry.
The "Scaling from Clinician to CEO" event will take place in Scottsdale at the Phoenician from October 11th-13th. Designed for those with one to five dental practices, the event provides insights on transitioning from a clinical role to a CEO position. Topics will address systematization, legal challenges, attracting associates, and appropriate bank funding. Prioritizing hands-on learning and actionable insights, the sessions are tailored for those aiming to expand and navigate the intricacies of dental business growth. Registration is capped at 150 participants to ensure an intimate learning environment. The emphasis is on the rising challenges of running small dental businesses and the advantages of evolving into a group practice model.