The dental industry has seen significant shifts in the realm of dental support organizations (DSOs). While some DSOs have successfully achieved recapitalization events, including two last year and two so far this year, others are struggling. Several major DSOs have indicated plans for recapitalizations in the second half of 2025, signaling a continued positive trend for DSO-affiliated doctors and their investors.
Despite this positive news, however, it is important to note that not all DSOs are as successful as others, and some may never reach a recapitalization event. The gap between thriving DSOs and those that are on the brink of failure is as wide as it’s ever been. Yet, struggling DSOs are still actively acquiring practices, often making promises they likely won’t be able to keep. What many dental practice owners who are looking to sell don’t realize is that some buyers may not survive long enough to deliver on the deals they are offering. Without helpful guidance, sellers may risk making a deal with a buyer who lacks the financial strength to ensure a long-term transition.
“Zombie DSOs”
Organizations that continue to acquire practices despite lacking the financial strength to complete a recapitalization event are referred to as “zombie DSOs.” They may be overleveraged, operationally inefficient, and/or unable to scale profitably. While these DSOs might appear to be sound, they may exaggerate their prospects, including claims of an imminent recapitalization that never materializes.
Dentists considering an offer from a DSO must ask: “Will the DSO actually reach its next recapitalization—and when?”
A buyer may claim its recapitalization is “just around the corner,” but this simply may not be true. DSOs often rely on continued acquisitions to stay afloat, meaning sellers risk tying their financial future to an unstable buyer. If the buyer fails, it could impact the seller’s earnout, deal structure, and long-term security.
As the DSO market matures, recapitalization events are taking longer to achieve. This shift has major implications for practice owners. According to the author’s firm, recent data estimates that there are 37 private equity–backed DSOs that are 5 years or more into their journey to a recapitalization event, and 17 of these 37 are at more than 7 years.
Unlike the earlier days of DSOs, when recapitalization events happened quickly, today’s environment demands patience. Investors are being more selective, growth expectations are higher, and economic conditions are increasingly uncertain. Dentists who are planning their exit should consider how long their potential buyer will take to reach a recapitalization—and what it could mean for their financial timeline. Selling to the wrong DSO at the wrong time could leave the dentist locked into a deal with a buyer that struggles to deliver, potentially impacting the seller’s financial upside.
The Benefits of Sound Advice
Good advisors can help dentists separate financially sound DSOs from those that are struggling by providing a number of services, including the following:
Vet potential buyers: An advisor should be able to provide in-depth industry insights regarding which DSO groups are thriving and which ones are scuffling, and which ones align best with the seller operationally and culturally.
Analyze the recapitalization timeline: A strong DSO should be able to provide clear, data-backed insights into its path to recapitalization, rather than vague promises.
Help protect the seller’s financial future: An advisor can enable sellers to achieve higher valuations and favorable deal structures while minimizing risk to their long-term payout—in short, help them receive the best possible outcome. A trusted advisor should be able to identify a deal that may look good on paper but could fail to protect the seller’s interests in the long run.
As the DSO market evolves—with the gap between successful DSOs and struggling ones appearing to be widening—practice owners must know the risks associated with selling to the wrong buyer. A DSO may be misleading, claiming a recapitalization is imminent when, in reality, it is using acquisitions as a way to stay afloat. Not all DSOs will survive long-term, even if they say otherwise. Working with an experienced mergers and acquisitions (M&A) advisor can help dentists sell to a stable, financially sound buyer that can deliver on its promises. The stakes are high when selling a practice, and the best decision is one that protects the seller’s financial future and the legacy of their practice.
About the Author
Ryan Mingus
Managing Director, TUSK Practice Sales
(tuskpracticesales.com), a healthcare mergers and acquisitions (M&A) advisory firm
