M&A in the Australian dental practice sector is taking root as new players enter the market, sector experts told Mergermarket.

While there’s still massive scope for consolidation in what is still a highly fragmented sector with more than 20,000 dental service businesses, according to IBIS World, the sector has moved past the basic roll-up playbook with mature assets now attracting attention as well.

“It is becoming increasingly evident that new players will enter the Australian dental market,” said Rob Harwood, M&A specialist at ADMA, a boutique advisory firm specializing in dental M&A.

This has been driven by two key factors: first, several established aggregators have paused their bolt-on strategies in recent years, creating an opportunity for new entrants; second, the absence of an ASX-listed dental group leaves a gap in the public market, potentially creating an opportunity for a new platform to establish itself and attract institutional and public-market investment, he said.

According to Harwood, new players include Australian private equity (PE) firm Pemba; Singapore’s Q & M Dental Group, which announced its proposed acquisition of Experteeth Dental Group for AUD 119.64m (USD 83.38m) this July, subject to conditions precedent; as well as local group ADTY, which has several practices already within its portfolio and has undertaken significant due diligence on potential bolt-ons.

Although Australia currently has no listed dental practice groups, that’s not to say the model doesn’t work for the sector, noted Max Connell, CFO at Averra Dental, launched this September with Pemba. There are successful listed players in other markets and once a platform is mature, public markets can be a viable source of capital, Connell said.

PE is particularly suited to the scale-up phase as it allows a longer-term view, with investment ahead of earnings rather than an excessive focus on short-term results, he said.

“New entrants will recognise the gap in the ASX-listed dental market but will need to consolidate and demonstrate sustainable earnings before considering an IPO,” ADMA’s Harwood said. “A reasonable target would be at least AUD 40m EBITDA.”

Mature assets in focus

There’s lots of interest from Asian players in the Australian dental sector, especially in companies like Experteeth that have large Asian client bases, said Holding Redlich national head of corporate Darren Pereira, who also advised Q & M on the proposed Experteeth deal.

Pereira sees opportunities for domestic or offshore PE firms as well as other offshore strategics to take these types of dental businesses to South-East Asia, with cosmetic dental chain Dental Boutique being a case in point.

Founded in 2013 by Malaysian-born doctors Reuben Sim and May Chan, the firm, with 16 to 17 clinics across Australia, New Zealand, and Malaysia, is reportedly seeking a growth-focused PE investor at a valuation of more than AUD 500m.

Other domestic owners of mature dental assets include PE firm Crescent Capital, a forerunner with its 2021 acquisition of National Dental Care for an undisclosed sum. Buyers like Blackstone, Carlyle, CVC Capital Partners, and Bain Capital have been named in local media reports as potential acquirers.

Ekera, which was acquired by The Growth Fund in 2014 and has 56 clinics, is reportedly a target for players like Australia’s Genesis Capital, owner of Pacific Smiles, which it acquired in a 2024 take private for around AUD 210m, and Impression Dental, which it acquired in 2021 for an undisclosed sum.

New Zealand-founded Abano Healthcare, which was acquired by Australia’s BGH Capital and the Ontario Teachers’ Pension Plan Board in 2020 for an undisclosed sum, took 84% in 1300SMILES in a 2021 AUD 165m take-private, adding to its previously acquired dental groups Maven and Lumino. According to its website, Abano offers several options to owners wanting to step back from their businesses.

For existing dental groups, there will likely be opportunities for consolidation, particularly among smaller operators seeking to combine their practices to achieve greater scale and operational efficiencies, ADMA’s Harwood said.

However, the catalyst for these transactions may be “a growing recognition that the opportunity to achieve premium valuations of 10–12x EBITDA have diminished”. This could create opportunities for buyers to acquire established groups at lower multiples, particularly where vendors are prepared to adjust their valuation expectations to reflect current market conditions and the benefits of consolidation, he said.

Roll-ups to continue apace

There’s no shortage of roll-up opportunities, with corporate ownership still representing less than 20% of the market despite decades of consolidation, Pemba’s Connell said.

“Dental is a mature sector that has already been through several waves of corporatisation and consolidation, but despite its history, remains highly fragmented, and we expect consolidation to continue for decades,” he said.

Pemba sees its timing to enter the market as particularly attractive because several structural trends are coming together, not least an ageing population, which supports demand for dental care, while also creating a wave of practice owners seeking succession and retirement solutions, Connell said.

Technology, including AI, is also changing how clinics operate, and we are seeing greater consumer interest in cosmetic and preventative dentistry, he added.

The minimum criteria for acquisitions will be those with AUD 1.8m EBITDA per practice, at least three to four clinicians and showing like-for-like growth, ADMA’s Harwood said. The playbook is to acquire individual practices at 4-6x EBITDA and, through scale, operational efficiencies and sustainable organic growth, build towards a group valuation of 10x-plus EBITDA, he added.

With experience from previous dental roll-ups highlighting the challenge of retaining practice principals beyond the earn-out period, new entrants need to approach acquisitions with a clear long-term strategy, “prioritising practices with sustainable organic growth and principals who demonstrate a genuine commitment to remaining involved for the next five to eight years”, he said.

It is very important that principals who are also dentists stay on as they have the client relationships, agreed Holding Redlich’s Pereira. “Practices with practitioner principals, reputable brands, loyal clients, and solid revenue streams make good targets.”

The multiple expansion – from 4-6x to 10x plus – is “more achievable for groups with a solid operating foundation and principals committed to longer-term involvement”, while considerably more challenging for groups that have lost key principals and must rebuild the business, Harwood said.

by Louise Weihart and Maggie Lu Yueyang