Across North America’s dental service organization (DSO) market, transactions are failing at higher rates or never materializing at all, as private equity buyers grow more cautious and sellers struggle to adjust to a new reality.

A yawning valuation gap has opened between what sellers think their practices are worth and what buyers are willing to pay, leaving many deals stalled, reshaped or abandoned altogether.

“It is less that deals are falling apart than that they are not coming together,” said Vince Nardone, co-chair of the Benesch Friedlander Coplan & Aronoff dental/DSO industry team. Sellers remain anchored to peak 2021 pricing, while buyers are recalibrating for a higher-cost, higher-risk environment, he said.

That disconnect is showing up early in the deal process, with many transactions failing to reach a signed letter of intent, said William Barrett, CEO and co-chair of Mandelbaum Barrett’s national dental law group.

“Doctors frequently have inflated expectations based on deals completed a few years ago,” said Barrett, who represents dentists and specialists in sales to DSOs. “When current offers come in lower, and with far less cash at closing, they question whether the deal is worthwhile.”

Mergermarket data shows North American DSO deal activity nearly halved from 2023 to 2025, with total M&A falling from 126 deals to 67 and sponsor-backed buyouts and add-ons dropping from 83 to 46. Deal values remain largely undisclosed.

^{Source: Mergermarket, data correct as at 20-Apr-26}

Cavities in the model

Dental was among the earliest proving grounds for healthcare roll-ups, attracting private equity investors with its fragmented base of independent practices, recurring patient demand, and perceived opportunity for scale. For years, DSOs aggressively consolidated the market, stitching together practices and boosting valuations through growth and financial engineering.

That strategy accelerated during the pandemic-era boom. With interest rates near zero and capital abundant, buyers competed fiercely for assets. “Fear of missing out was widespread,” Nardone said, and some firms paid premium multiples or stretched on quality to keep pace with growth expectations.

That rapid expansion came with consequences, said Gary Herschmann, healthcare services M&A transaction attorney at Baker Donelson.

“Many platforms built during that period were insufficiently integrated, functioning more as collections of individual practices than cohesive operating companies,” he said. “Today, a successful exit typically requires a fully integrated, professionally managed platform with centralized corporate infrastructure.”

Early expectations were often inflated. “DSOs promised selling dentists and specialists rollover equity returns of three, four, or even five times,” Nardone said. In today’s higher interest-rate environment, “some DSOs cannot deliver those promised returns.”

Mark Censoprano, co-CEO of oral and maxillofacial surgery management services organization MAX Surgical Specialty Management, said many of those early rollups didn’t create best-in-class organizations capable of absorbing market volatility. “Too many DSOs have been built on financial engineering and rapid growth rather than on stable foundations,” he said.

Sellers feel the bite

The slowdown reflects a convergence of pressures – financial, operational, and psychological.

“The cost of capital is probably the single most important factor impacting pricing in today’s market,” said John McClure, co-founder of dental business consulting firm Aligned Dental Partners. “Practice performance still matters, but fluctuations in valuation are driven first by debt costs and second by production and volume.”

At the same time, inflation and labor costs have compressed margins. “Investors have become more selective and now recognize that the business is highly human-capital intensive,” added Dana Jacoby, founder and CEO of healthcare M&A consulting firm Vector Medical Group.

Deal structures have also shifted. Transactions that once offered large upfront payments now include less cash and more contingencies. Barrett noted that cash previously paid upfront is increasingly structured as promissory or maintenance notes, shifting risk back to sellers. Buyers are also demanding longer commitments and sustained performance, with five-year employment agreements and EBITDA maintenance requirements becoming common, he said.

Alignment has become a central focus. “A model where doctors are purely employees is increasingly viewed as suboptimal,” McClure said, noting that investors increasingly want clinicians to have “real skin in the game” and participate in long-term value creation.

Practices reliant on a single high-producing doctor – or a “super GP” – face heightened scrutiny due to the difficulty of replacing that production, Barrett noted.

Buyers are now prioritizing operational sophistication and integration over simple aggregation. Platforms that can improve performance internally – through better systems, staffing, and patient experience – are more attractive than those reliant solely on acquiring new practices.

Differentiation through technology or specialization has become critical in a crowded field. “Sponsors are now asking a very simple but important question: What’s different here?” McClure said.

Pulled processes

Several processes have been pulled or restructured, underscoring the DSO downturn, according to several recent Mergermarket reports.

BlackRock pursued a sale of Paradigm Oral Health alongside Jefferies, but the process was shelved despite interest from financial sponsors due to a valuation disconnect and challenging market conditions.

Shore Capital Partners similarly ended its sale process for Southern Orthodontic Partners.

Continuation Vehicles are emerging as an alternative for dental platforms. Linden Capital Partners is working on a CV for Sage Dental, with Goldman Sachs agreeing to anchor the single-asset vehicle.

A cleaning, not extraction

Despite the disruption, industry participants broadly view the slowdown as a recalibration rather than a collapse. “This is a temporary reset rather than a permanent slowdown,” McClure said.

“A rebound is already underway,” noted Barrett, albeit with tighter structures, less cash upfront and more risk shifted to sellers.

What emerges will likely be a more disciplined market, where valuation is grounded in performance, risk is more evenly shared, and the most durable platforms attract capital.

There is growing optimism that artificial intelligence can help expand margins by streamlining functions such as medical billing and improving integration, potentially positioning businesses to exit at more favorable multiples, Jacoby said. That leaves sellers with a strategic choice: invest additional capital to enhance operational efficiency and pursue a higher valuation, or sell now and accept a lower price reflecting the upgrades still required.

As Jacoby put it: “The decision is akin to selling a fixer-upper at a discount versus investing in renovations to market a turnkey asset at a premium.”

^{Source: Mergermarket, data correct as at 20-Apr-26}