The Group Dentistry Now Show: The Voice of the DSO Industry

DSO Podcast

Three industry thought leaders gather to discuss what to expect in the DSO industry in 2025. Rich Blann, Managing Director of DC Advisory, Jon Fidler, Founder & CEO of Fidler & Associates and Dr. Roshan Parikh, Founder & CSO of DSO Strategy, share their thoughts on what to expect in 2025. The trio discusses:

DSO operational performance
Key human capital trends
M&A
Economic climate
Much more

To learn more about DC Advisory visit – https://www.dcadvisory.com/ or reach out to Rich directly at richard.blann@dcadvisory.com

To learn more about Fidler & Associates visit – https://www.fidlerandassociates.com/ or reach out to Jon directly at jfidler@fidlerandassociates.com

To learn more about DSO Strategy visit – https://www.dsostrategy.com/ or connect with Dr. Roshan Parikh at drro@roshanparikh.com

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DSO Podcast transcript – A Look Ahead: What to Expect in 2025.

Bill Neumann : Hey, welcome everyone to the Group Dentistry Now show. I’m Bill Neumann. And as always, we appreciate you tuning in, getting towards the end of the year here. And we’ve got a great panel discussion. As you can see, it’s called What to Expect in 2025. And I don’t know if we are really going to be able to figure out what’s going to happen in 2025. There’s all sorts of things that have happened late of 24. We’ll talk a little bit about those and the impact they’ll have next year. And I think what we may want to start off with is kind of a recap of 2024 and we’ll start to get into the Q&A. So, what happened this year? And then with some of the changes with the election, maybe some little speculation around what may or may not happen with inflation. We can talk about geopolitics and maybe the impact that might have on things. Um, we’re gonna, we’re gonna get pretty deep here. So, um, first off we’ve got John Fidler. He is the founder and CEO of Fidler Associates and Associates. He is going to talk about recruiting, retention, HR. Um, so John, thanks for being here. You’ve been on the show before.

Jon Fidler: Yeah. Yeah. Thanks for having me, man. Looking forward to it.

Bill Neumann : Yeah, it’s been a while. We have Dr. Roshan Parikh. He’s the founder and chief strategy officer of DSO Strategy. He is also on our editorial board here at Group Dentistry now. So Dr. Roh, good to have you.

Dr. Roshan Parikh: Thanks for having me. Good to see you.

Bill Neumann : And you’ve been on the podcast before. We did a couple of DSO declassifieds and you were on talking about, probably talked about COVID and we’re talking about all the crazy M&A activity in 21 and 22. So different conversation today for sure.

Dr. Roshan Parikh: For sure. Glad we’re not talking about COVID.

Bill Neumann : No, I’m glad as well. And we have Rich playing with us. Rich actually, even though Rich has not been on the show before, I rely on Rich for a lot of great data. I mean, if anybody’s seen some of the data that I’ve talked about or shared with people, Rich is the creator behind a lot of that. Um, DC advisory is the organization that he, um, works with. He’s the managing director there. So Rich, it’s great. It’s great to have you on. And we know we had you on a, um, webinar before, but I think is the first time you’ve been on a podcast.

Richard Blann: Yeah, no, really appreciate it. Looking forward to it.

Bill Neumann : Okay. Why don’t we go through quickly, and I went through your backgrounds a tiny, tiny bit, but John, how about a little bit of your background? You were at Patterson for a while, and then really talk about what you and Fiddler & Associates do.

Jon Fidler: Yes, we do. We perform executive search for really any multi-site healthcare group. So we focus within dental. That’s just obviously where kind of our background experience came from. So, you know, we work with anybody from startups and the doctors are just kind of starting forming their executive team all the way up to some of the larger groups and helping out with some of their senior level searches.

Bill Neumann : And John’s been in the dental industry for quite a while. Rich, how about your background?

Richard Blann: Sure. I’ve been an investment banker for the last 25 years. I focus on providing M&A and capital-raising advisory services to my clients across physician practice management in totality, so everything from retail-oriented sectors like medical aesthetics, all the way through to high surgery and high surgical specialties like orthopedics. I spent about 75% of my time in the dental world. I’ve closed well north of 20 DSO transactions over the last five years, and really excited about what lies ahead here in 2025. Thanks, Rich. Dr. Rao.

Dr. Roshan Parikh: Yeah. Uh, general dentist, my profession, I think I’ve been in dentistry for like 20 years now, uh, which is makes me old. Uh, but you know, I founder of a P back DSO, kind of a DSO confidant, um, DSO strategy. We do some, uh, consulting for manufacturers, vendors looking to get into DSO space and then kind of on the. The advisory side, we stand alongside private equity firms and banks helping with all sectors of diligence during a transaction and kind of helping them strategize the roadmap ahead post-close. I was the first dentist in my family. Now there’s five of us, so I’m pretty obsessed with doctor-patient experience and kind of how the, especially nowadays as the consumer experience and the patient experience become one experience, how the rights tech stack can help make that even better.

Bill Neumann : Thanks, Dr. Rowe. Why don’t we start things off, you know, obviously this is what to expect in 2025, but I think we’d be remiss if we don’t talk about, you know, the past year, maybe the past couple of years, and then we can kind of jump into the what to expect. So, John, from your perspective, from a recruitment standpoint, and just really the human capital side of things, what are the last, last year, year and a half been like?

Jon Fidler: Yeah, I think it’s kind of, it all started back in like probably January of 2022 when we started seeing some layoffs from some of the groups and manufacturers and kind of companies within the industry. So, you know, kind of the, the acquisition side obviously slowed down quite a bit. And, you know, what we saw from the first side is that, you know, groups are kind of focusing more kind of internally. So we were starting to see kind of dropped off a little bit on the, business development, you know, an M&A type, you know, roles that we were filling, and it kind of merged a little bit more towards like internal help. So like revenue cycle management, a lot of financial roles, just to kind of, you know, tighten up what was currently happening, just kind of make things look a little bit better from a growth standpoint. And, you know, really just kind of trim in the fat a little bit, it’s probably easiest way to say it, but definitely was more internal type hires, there’s always operational needs and those sorts of folks, but definitely turned a little bit more towards the financial side.

Bill Neumann : And Rich, on your side of things, what have you been experiencing? I would say, again, you can take a look at the past year, year and a half.

Richard Blann: Yeah, it’s interesting. So as we came out of COVID and the world restarted again in terms of M&A, We experienced the most robust M&A market in my lifetime and probably many generations in terms of volume of activity, as well as the valuations that we saw. We then went through a massive market reset. The cost of capital went up materially. Uh, the, uh, underwritable, um, cashflow generation capability and how buyers looked at investing behind DSOs changed quite dramatically. Um, and what that, what that resulted in is, um, a lot of, a lot of DSOs attempted to come to market to explore recapitalizations in, in 2023 and 2024. There were north of 30 DSOs in the market at any given time, and we’ve only had four successful closes in that time frame. A lot of it has to do with resetting buyer and seller expectations and reducing that bid-ask spread on what buyers expect to get. and what buyers expect to pay and what sellers are expecting to receive. I feel like we’ve come out of the trough, which hit basically over the summer of 2024, and we’re in a market now that looks a lot rosier on a go-forward basis. we had to go through a period where a lot of the DSOs hit pause on M&A. They focused more on internal operations and efficiencies and really practice integration, which I feel like a lot of DSOs put on the back burner when they were growing quite rapidly coming out of COVID. So 2024, I would characterize as the lowest M&A volume activity we’ll probably ever see in the dental world, but one that was necessary as a lot of the DSOs looked inward to solidify their businesses, integrate a lot of the M&A that they had completed over the last several years, and really position themselves not just for a recap, but position themselves for the next 10 to 20 to 30 years.

Bill Neumann : Thanks, Rich. And I think Ro has some comments regarding this too. I mean, you had talked a little bit about very little M&A at all in 2024. A lot of groups trying and really just there were no buyers out there. So, or very few. So, so Roe, on your side of things, I mean, you do a lot of strategy work. You, you’ve helped some DSOs really focus in on same store growth, which has been one of these, you know, terms that it seems like every year, every couple of years, there’s a new focus for the industry. You were focused in 21 was all M&A, right? It was just acquisitional growth. AI, RCM, right? We hear those things. So I think technology and same-store sales really kind of go hand in hand. And maybe talk a little bit about that, Ro.

Dr. Roshan Parikh: Yeah. To John and Rich’s points, if you’re trimming the fat per se on the human capital side, And there’s, you’re looking, you know, you’re not going to market or you had an unsuccessful process when you went to market, you’re going to look inward. And technology definitely plays a huge role in in kind of making things more efficient. On the admin side, I think on the front of the house side, people were looking more and more. I think we see automated insurance verification as something that’s there. Maybe I’ll start at a higher level. To Rich’s point, when you’re looking at an integrated DSO, people are really A lot of the private equity buyers are looking at, are you on one practice management software? Is it cloud-based? I’ve seen DSOs that have 13, 14 PMSs of different vintages. Some are on-prem, some are cloud. A private equity buyer looks at that as a future. And so, whereas maybe in 2021 they would have said, we’re going to put in the work, we’re going to buy it anyways. Now they’re just like, this is going to cost too much qualitatively and quantitatively. And I think DSOs are integrating themselves using technology, having one PMS or, you know, a couple PMSs, having their own data lake, automatic insurance verification, radiographic AI, I think is, you know, getting more and more adopted on the DSO side. Just, if you don’t have as many human bodies either on the corporate side of the P&L, I think they’re also looking at how do you minimize or maximize the labor that you have inside of the offices. And so, you know, those labor wages have gone up by 30, 35% over the last two, three years, and that maybe can’t reset back down. But instead of having forefront desk people, maybe you could get down to three or two using technology.

Bill Neumann : Yeah, some great, great points. And yeah, we’ll definitely discuss, you know, the different technologies, because I think it ties into certainly what John’s focused on. Jump, kind of move away from 2024, and we look at, you know, opportunity in 2025. If I’m a DSO, can you discuss the candidate market? Like, what does it look like? I know there’s been, like you mentioned, a lot of layoffs. And that’s just not, that’s not exclusive to DSOs. I mean, we’ve seen across the entire dental industry layoffs, distribution, manufacturers, technology companies. I mean, some have been some pretty significant layoffs. Some have been in stages. And I don’t necessarily think we’re through any of that. But if I’m a DSO, I’m scaling up. Talk a little bit about the candidates that are out there and the opportunity that may be there because we’ve got people that have been laid off and some of those people are really talented and they’re looking for the right opportunity.

Jon Fidler: Yeah, there’s a ton of great talent out there that, you know, folks just, you know, further through the downsizing or whatever the layout for restructuring might be that, you know, have DSO experience, large, small, just kind of all over the place. I think, you know, one of the things I think that’s shifting a little bit too, is kind of the openness of candidates through that, you know, 21, 22, 23 phase. The candidates were kind of the drivers in the market, you know, the groups are growing and, you know, human capital is, you know, pretty scarce, I think all throughout and, you know, at least quality folks. And so now there’s a lot more quality folks out in the marketplace. They can bring experience and or best practices in from other groups. And so it shifted from a candidate side where, you know, Obviously during COVID, if there was any silver lining, I think from a candidate standpoint through that was folks became used to being remote or working from home or traveling into offices sporadically, where it does feel like now it’s maybe shifting a little bit more towards the hiring companies and they’ve got a little bit more leverage on the candidates. So we’re seeing a shift of folks. groups wanting people in the headquarters or in the territory that they’re running and those sorts of things, which before could manage remotely. So I think it’s actually been a blessing that now there’s kind of a blend. We can attack and operate and manage these types of environments that they’re in from either remotely, you know, being in person or kind of at a hybrid model. So, um, I, you know, I, I think that shift from a candidate standpoint is you need to be a little bit more open to, you know, what, what the groups are requesting because there are so many candidates out there. They can kind of find folks that check the boxes a lot easier. And so adapting to what the needs of the groups are is kind of where I see 2025 going and just, uh, the candidates being a little bit more open to things that are being requested directly from the group.

Bill Neumann : Are you seeing that, John, where these groups are saying, hey, you know, this is not going to be a remote position. It’s going to be an office. Is that shifted quite a bit, say, from two or three years ago?

Jon Fidler: Yeah, definitely. That’s kind of one of the main focuses. And I think the candidates are kind of coming to terms with a little bit. You know, when we would talk to candidates a couple of years ago, they were kind of driving it and saying, well, I’m not going to do that or, you know, I’m good in my current place. And, you know, now folks are maybe out searching for jobs, maybe a little bit more on the aggressive side. And so they have had to come to terms with, you know, if I need to relocate or, you know, it’s a move across country or something, you know, they consider it a lot more. But, definitely the momentum or the leverage has shifted towards the hiring groups, for sure, of what they are. Every group is structured a little bit differently and has different requests that they want the candidates to use. It’s been a big shift, I think, from talking to candidates. Now that we have numerous candidates in the database and network, we say, well, this is kind of a requirement up front. It was one of the first questions we asked, depending on what the request of the group is.

Bill Neumann : Roe, when you’re doing your consulting work with different DSOs, do you have the conversation with them about, you know, remote work versus in office? And if so, what’s the feedback?

Dr. Roshan Parikh: Yeah, I mean, I think most, when you look at publicly traded companies as a benchmark, more and more folks are requiring their team members to at least have a hybrid work environment and they see the benefit of team collaboration in person in office and probably a, you know, I, I was going to ask John, like, is there a, a statistically significant higher output when people are in office versus not? And is that like, people seeing if you have, if you’ve trimmed the fat and you need more out of your employees, um, is it better for them to be in office? But I definitely see DSOs that are just like, you know, especially kind of with the, the year calendar year turning and, you know, 40 days or whatever it is, it’s like, they’re like, okay, well, we’re going to, you know, slowly go back into the pool of maybe it doesn’t become 100%, you’re at the office eight to five, five days a week, but it definitely is more and more becoming 50% plus.

Jon Fidler: Yeah, and I think just to piggyback on that role, I think this next year will kind of, you know, expose where that difference is going to be between the production level. So, you know, I think we’ve shifted from kind of the remote this year feels like a little bit of hybrid. And then I think next year, we’ll kind of see that productivity increase. But you also factor in you’re probably keeping your best workers as well. So it may be a little skewed that way is that, you know, you’re putting a little bit more effort into you know, keeping your rock stars and keeping, you know, your A-team players. So obviously, they’re going to be more productive than maybe some, you know, B’s and C-level type folks that you had just to kind of fill some role. So it’ll be a little skewed, but, you know, I think it’s probably a little bit more going to expose itself in the culture, you know, of the group. And so instead of having, you know, RCM folks kind of all scattered throughout the country, they’re all going to be headquartered. You know, their ideas are shared and things just kind of get a little bit tighter that way. So I think probably the culture fit and it’s going to be a little bit more important to these folks, too, as they’re selecting candidates.

Bill Neumann : I’m going to move over to Rich here. Now, this is funny. This came from Roe. It was a text. I don’t know where this quote is from. You can let me know, Roe. The firm estimated there was $2.62 trillion in dry powder for private equity shops to deploy as of July. the bankers are giddy. So Roe wanted me to ask if you are giddy about next year.

Dr. Roshan Parikh: He looks like a giddy kind of, you know, look at his face. He looks giddy.

Richard Blann: I wouldn’t say giddy, I would maybe say cautiously optimistic, but you can interpret it however you wish. Look, the money needs to be spent. Otherwise, it needs to be returned to the investors. So the fact that we’ve got $2.6 trillion sitting on the sidelines right now waiting to be deployed Yes, it’s exciting, but it’s not going to be deployed in a haphazard manner. We saw a little bit of that coming out of, probably saw a little more than a little, coming out of COVID when there was this period of time of 12 months or so where I define it as a feeding frenzy of M&A activity and somewhat of an abandonment of traditional corporate finance fundamental investing. There was an absolute rush to deploy capital right out of COVID, and I think what some investors experienced was putting money behind an opportunity just to put it behind an opportunity doesn’t yield an outcome that is always the most desirable one. When I look at 2025 and I think about my private equity friends who need to spend money in certain areas, they’re doing it with a very different lens than they did in the summer of 2021. We’ve learned a lot in the last three, four years in terms of what makes a great DSO investment and what makes a great healthcare investment. And what I’m starting to see as we shift from 2024 to 2025 is obviously a focus on A-assets. And there have been a number of recent transactions that have closed that I would qualify as high-quality A-asset category investment opportunities. Where we’ve really fundamentally seen a change in terms of the buyer universe is putting their money behind businesses that have already demonstrated that they’ve been well-built, that they already have a management team that has led similar types of platform investments to successful recapitalizations historically, that they’re investing behind businesses that have already gone through a lot of the heavy lifting in terms of infrastructure building, practice integrations, and what I call the value creation dynamic that is absolutely critical to be able to validate and demonstrate on a historical basis that the DSO in particular has added value to the practice, and that is now manifesting in the form of revenue growth, and more importantly, in earnings-based growth that substantially exceeds what the practice was able to achieve and accomplish as an independent dental practice. So when I think about that big bag of money sitting on the sidelines in private equity, It doesn’t come with a haphazard approach, and not every business is going to attract private equity investors. The good ones will obviously stand out, and it’s up to folks like me and my colleagues in the industry to be able to articulate the differentiation benefits of a DSO or a PPM business, or frankly, any business that attracts private equity. But you have to be able to truly validate that that thesis is not just a strategy, that it’s been a strategy that has been executed upon and it’s delivered real success on more than just a month or two. We’re talking about track record that necessitates multi-year of performance and value creation to garner the interest from the private equity community. But look, again, the money needs to be spent. And I think that the buyer universe now understands that the cost of capital is a lot more stable today than it was 18 months ago. We’ve put the bank failures in the rearview mirror behind us. We finally have visibility into what the administration change will look like, and while we might not necessarily know what the impact is going to be on the overall economy, I think there’s a lot of questions now that have been answered, or at least directional guidance as to where we’re going. To give the investors confidence that there’s not gonna be a fundamental sea shift change to something dramatically different and they can start investing with confidence and not with fear and frankly risk aversion.

Bill Neumann : So the industry’s coming off acquisition hangover, right? We’ve, you know, you had the past couple of years and maybe bought some practices or some groups that maybe they shouldn’t have or overpaid for them. Are the sellers’ expectations realistic now? I mean, has that, we have an idea where the buyers are. What about the sellers? Richard and Ro, I’d love to get your feedback on that.

Richard Blann: Yeah, I’m happy to start in a row if you want to chime in. Look, it it it takes a it takes time. It takes time for, you know, for this for this change to occur. And it largely, you know, from a buyer’s perspective, it happened very quickly because inflation spiked. The Fed reacted. Interest rates rose almost overnight and the cost of capital doubled. When that happened, buyers immediately pivoted and shifted their strategies. The problem was sellers were still hanging on to what their friends and colleagues and competitors were able to achieve coming out of the COVID lockdown and what I call the M&A COVID bubble, which was basically from the end of 2020 through the beginning of 2022, valuations hit historic levels that you know, I don’t anticipate we’ll ever see again. The biggest challenge, however, was convincing sellers that we weren’t going back to that dynamic. There was a lot of, well, I’ll just wait another quarter or wait two more quarters or four more quarters or eight more quarters. And now the can has been kicked down the road substantially enough for the sellers to understand that we are in that new paradigm today. We’re not going back to where we were and frankly the valuations that are available in today’s marketplace are very similar and comparable to what we were seeing at the back end of twenty eighteen and twenty nineteen which i always remind people wasn’t all time high. It was it was only this very very unique bubble of you know fifteen to eighteen months coming out of covid that distorted the valuations to the to the sellers benefit. But now we’re in a market where, you know, seller expectations have receded. They understand that we’re not pivoting back. And I think that, you know, while it’s taken almost two years now to reset the market, that we’re at a level where the bid-ask spread has narrowed almost to the point where, you know, we understand with very good confidence where the buyers are going to bid and where the seller expectations are. You know, it really comes down to, you know, folks that sit in my seat across the industry to articulate to their clients what the reality is. And I think that’s been a little bit of a challenge when some people are still holding on to those valuations that a lot of folks achieved back in 2021. Go ahead.

Dr. Roshan Parikh: Yeah, I mean, yeah, to piggyback on to Richard’s point, the value, the seller’s valuation expectations I think they’ve tampered down a little bit. I think something that’s happened over the last 18 months that’s probably helped, even though it’s maybe more of an extreme situation, In 2021, if you got an all-time high from valuation for your business selling into a DSO, typically you you get some form of cash payment upfront and you roll, let’s say 30% of equity into the management company or whatever the structure is, what if that 30% becomes $0? And I think when you’re seeing DSOs that are lender-owned and have written down their equity to zero, now You might have been really proud at your country club to talk about the 9.5x or 10x that you got, but in reality, 30% of your money went to zero. It kind of sucks to say it, but it’s like the failures and some of these extreme situations that we’ve seen in the DSO space and other PPM markets, but in the DSO space, it’s like that’s teaching sellers that I really care about who I partner with and maybe it’s not just quantitative numbers that are going to create the outcome for me and that those failures are kind of teaching sellers that to tampen down their expectations.

Richard Blann: If I can jump on to the back end of that, because Rose is making an absolute brilliant point here in that the complexion of your compensation when you sell your practice matters, the headline number that everyone uses to puff their chest up and say, hey, I sold for 10 times EBITDA or 12 times EBITDA or 20 times EBITDA. The higher that number, the more multiple that you get for your EBITDA usually comes in the form of incremental debt that gets put on the business to raise the money to pay for the practice. And when you have too much leverage on your business, unfortunately, it introduces significant risk. And, you know, just like borrowing too much money to finance your house, if you can’t pay the mortgage payments. Well, the bank forecloses and nobody wants that as an outcome because your equity goes to zero and you don’t own, you don’t own the business anymore. So it is absolutely critical to understand not just the headline number, but what is the complexion of the proposal that you’re getting and where are those dollars coming from? Because if they’re coming mostly from a bank that’s lending the money, you’re putting incremental obligations onto the financial profile of the business. And those obligations in the form of interest and debt repayments, those are at the top of the food chain. They get paid first. And if there’s money left over after that, well, then it goes to the equity owners. That’s a dynamic that unfortunately we’ve had to live through. And now we’ve seen, you know, more than more than 15 or 20 DSOs in the last two years have to suffer through that dynamic. Um, because of the, you know, excessive use of leverage to pay for the excessive valuations that, um, you know, people were putting forth back in 2021 and 2022.

Bill Neumann : So let’s stick with this because this is a question that I’m really curious about. What does 2025 look like for these distressed DSOs? And there are a lot of them out there. You know, we don’t talk about them in the industry. I mean, we do behind closed doors, but there are a lot of these DSOs that are not doing well. And so what is and I know every situation is different, but in general, what is next year look like for for some of these groups that are in trouble?

Richard Blann: I’m happy to start than you guys, if you want, but well, it really depends on who’s trying to drive performance improvement at this point. You know not every lender and capital provider has the expertise to actually add value to down to the practice level so you’re seeing a bunch of different strategies being deployed. Some strategies have taken the form of we’re a bank. We don’t have the first idea how to run a DSO. So we’re just going to immediately sell it into the market at a bargain basement price. And hopefully it gets in the hands of a DSO that can integrate these practices into their platform and start providing the support that they were promised to begin with. That’s one avenue. You’ve got another avenue where you have a lot of lender institutions that have taken over businesses, and they’ve been trying for years to invest behind the business so that they can turn it around. It’s not easy. It’s very, very difficult to turn around a struggling business, especially one in the healthcare space with high regulatory hurdles and other complex situations. And then I’d say the third bucket is around combination transactions. So a lot of these struggling DSOs that are now lender-owned or have challenged balance sheets, they’re looking to partner with other DSOs in the form of cashless combination mergers. whereby they can plug their business into another one that might have a better MSO and support infrastructure to be able to better support the practices and drive value for the overall shareholders. So it really depends on the dynamics of the situation, but there are multiple avenues in which hopefully we can get these DSOs out of the hands of the, which they want to as well. No lender wants to own a DSO for an extended period of time, because they’re not in the business of owning and running businesses. But move these businesses into the hands of people that can really add the value. And because the DSO strategy is a very powerful one, and it’s been proven over 30 plus years, Um, but you know, there are always going to be struggles and failures and we have to recognize where those are and, and how to move those businesses into the hands of the people that can write the ship and get them, uh, back on the appropriate footing, both, um, operationally and financially.

Bill Neumann : ROWAN, I know you’ve been helping some write their ships. So can you talk a little bit about, you know, what, what you think are, um, some opportunities, what does 2025 look like for some of these challenge DSOs?

Dr. Roshan Parikh: Yeah, I mean, uh, Rich said it like turnarounds are tough when you are, when you have limited financial and human capital resources, how do you run a a successful business period, let alone a business that you have to turn around that maybe is burning cash, I think that the people component of it plays such a huge role. I wanted to ask John, in those kinds of distressed DSO situations, maybe John becomes a like a canary in a coal mine type of person where people are coming to him before something completely fails. But those are usually the 18 players that you need to be able to keep to right the ship because they’ve been there, they understand it, they have the experience. I think the human capital part of it and the experience of folks that have done it before and can do it with limited resources, not the COO that says, I’ll come up with a strategy and my VP and directors and managers will deploy it. It’s the COO that’s rolling up his or her sleeves and saying, all right, we all have to do this. you know, the, the, how do you rally cry that team and retain those team members through a distress situation? I, yeah, maybe, maybe kick it to John. Cause that’s something I wonder about a lot.

Jon Fidler: hiring the leadership team, a group is getting a little more specific that they have to have experience that they’ve led, you know, through a transaction or through a similar situation where, you know, the one thing I think they have opened up to is maybe a little bit more coming from outside like different verticals coming from a med spa group or a vet group or you know, uh, an ophthalmology group or something like that. So they just want somebody that has that experience. And, you know, I think over the last year and a half, you know, there’s more folks that have that experience that have worked in distress situations or, um, maybe a limited number of transactions, but they’ve gone through a transaction before where, you know, a year or two years or three years ago, They were okay maybe taking a VP somewhere, kind of giving them their first shot because things were running well and they just kind of understood the business. But now it’s definitely from a search standpoint, getting a little bit more direct from the hiring group. They want somebody that has that direct experience.

Bill Neumann : Let’s stay on this, John. Talk a little bit about what you think the hiring market’s going to look like in 2025. It seems like the pool’s more candidates out there. would assume that they’re more experienced. So are these DSOs going to have more to choose from? I think the only issue is that some may still want to be working remote, and that might not be an option.

Jon Fidler: Yeah, yeah. I think, you know, there’s there’s plenty of options out there. You know, I think the one thing that as we move forward and kind of going back to what Rich and Ro were talking about is I don’t think, you know, we’re getting these candidates who are just kind of in a hurry to hire. They’ve been laid off and they’re just in a spot and they want something quickly. I think it’s more of like a boiling pot of water type of method rather than a light switch. I don’t think just all of a sudden January is going to come along and a light switch is going on and everybody’s hiring and things just blow up and go crazy. Yeah, I think it’s a little bit more, you know, folks have kind of learned their lesson. They don’t want to get burnt real quick. So they’re coming up with things and kind of our litmus test that we work with or kind of use, you know, internally here is. At the start of January of 2022, we had three or four kind of business development, M&A type roles, and those all just kind of all quit. And they decided not to hire and kind of wait things out. And that’s kind of drug out over the last couple of years. And we’re starting to see a lot of these BD roles start to come back. So we’ve had multiple come back in the last month or two since they feel like there’s a little bit of momentum and kind of going back to to Rich and Ro, there’s definitely money out there to be spent. But I think people are a little bit more cautiously in how they’re approaching it and probably doing their diligence on not only groups that they’re going to purchase or integrate with or acquire, but even from a candidate standpoint, they let things breathe a little bit more. The hiring process has taken a little bit longer, which you know, in all honesty, it should happen because I think people expose themselves and the groups expose themselves over those time. And so it’s it feels like it’s kind of getting back to the right way to do things, you know, in all honesty, where folks are doing their diligence ahead of time and and putting time and effort into these sorts of things and really not bending too much on what their expectations for the background or experience of the candidates are, especially especially in the leadership roles, sweet, sweet roles. And, you know, folks are kind of in their head thinking, OK, in the next, you know, 12, 24, 36 months, we’re kind of just setting ourselves up for whatever that transaction may be. And so they’re kind of giving it a little more time to be specific in the types of candidates they’re bringing on. So it feels good, especially from an executive search side, that folks are investing the time in it, putting more emphasis on it and really paying attention to it throughout the entire process.

Bill Neumann : Past year, year and a half, if you look at the investments that DSOs have made, I think capital equipment’s certainly been hurt. You don’t see the investments, not as much anyway, and operatories and cone beam and scanners, not like you had when interest rates were lower. What about investments in technology? You know, things like we were just talking with John about, you know, labor. You know, there are solutions out there. And Ro actually and I were talking a little bit, and I’m kind of curious your thoughts on because we automate more, you know, whether it’s from the standpoint of phone calls coming in, you have AI actually handling that to a degree, RCM, so verification, automating that as much as you can. And then even getting to the point where you could have self-check-in, where there isn’t an office manager, at least there isn’t somebody at the front desk. People are checking in. I mean, do we see this as, first off, are there groups out there looking at this seriously? And do we think this is something that can happen in 2025 to a degree? Rob, why don’t we start with you?

Dr. Roshan Parikh: Yeah. Los Angeles last week and talking to some, some DSOs. And I was giving them my experience getting blood drawn at Quest. And in Atlanta, they just had a check in kiosk. And there were it wasn’t that there was one front desk person, there were zero front desk people. And they had three kiosks and you you know, you have an appointment you they scan the top and bottom of your driver’s license and you’re checked in and there were I think four phlebotomists in that in that location but every person in that location was revenue producing and I brought that point up and there was a DSO that has, I don’t know, 120, 30 locations that was like, actually, we have, you know, we’re piloting 10 kiosks across our group to see how it goes. And, you know, I think My story point is I was out of quest in like I was in in five minutes and I was out in 10 minutes. But if you could use that kind of efficiency to gain three or four points on your PNL and on the EBITDA line, I mean, I think that more and more folks are looking at efficiency and I hope that The technology plays a big role in maybe not getting to everybody has a kiosk and it’s totally faceless, but maybe there’s some sort of hybrid stuff that, you know, I know that DSOs are definitely looking into.

Bill Neumann : So Rich, you know, when it, when it comes to technology, I mean, as you speak to investors and you look at different groups, I mean, are they evaluating DSOs and going, Hey, you know, we’re, we want somebody that already either has this in place, these type of technologies that they’re looking at them. I mean, does that play a role in, you know, the decision-making process and the value that they put on the group?

Richard Blann: Yeah, great, great question. So it’s all part of what I describe as the DSO playbook and the investment thesis into the dental industry through through the DSO investment. It’s all about driving value creation at the practice. If you can institute systems, people, technology that provide more support to the practices and do it at a lower cost, whereby the clinicians are able to deliver more and better care to their patients in a lower cost environment, That is the fundamental investment thesis. How you get there can take a lot of different forms. And I think technology has become significantly more important to both the investors as well as the operators of these businesses. I mean, Goh, you were mentioning, you know, customer intake on the front end and then RCM on the back end. You know, those are two great examples of, you know, ways to drive better efficiency at a at a significantly reduced cost by using technology as a replacement for human capital. It comes down to what clinicians are using. We’ve come a long way in the last five, 10 years in the dental industry from the use of AI and technology to better inform patients on a treatment plan, what it really means. Showing people where the problems are and what they should be doing to address them has resulted in significantly better treatment plan acceptance rates. Using AI in terms of imaging can help identify issues or challenges that maybe the human eye can’t pick up. So, you know, it absolutely is a huge component of the overall investment thesis. And, you know, whether your DSO has technology today or an investor understands the use of technology, the implementation and the execution of adding it into a practice, both of those create value. So whether you don’t have it today and The future, have it today, but you want to roll it out to more practices or maybe build on what you have. It’s going to be a huge part of what we see driving value over the next five to 10 years.

Bill Neumann : Oh, that’s great to hear. As we start to wrap things up here, so we’re moving into 2025, we have a new administration, you have a Republican House, Senate, a Republican president, the Senate and the House, these aren’t huge margins, so it’s not gonna be totally controlled by the Republicans, but certainly different than we’ve had in the past. We also have some geopolitical issues. We were talking a little bit about that. We really can’t predict how those are going to go, but we have some instability in Ukraine with Russia, and of course, in the Middle East. So, I guess in the next four or five minutes, I’d just love to get, you know, input from each one of you from your perspective on what we should expect in the DSO space in 2025. So, John, why don’t we start with you when it comes to recruitment, retention, and just the human capital aspect.

Jon Fidler: Yeah, I, you know, I like to, you know, be optimistic about everything. I mean, you can’t control what’s going to happen that way and, you know, in the world and what’s going on. So I, you know, I do think people are going to be a little bit more cautious as they’re hiring a little bit slower, uh, throughout the process and those sorts of things. But, you know, my hope and kind of what we see is that things are, you know, definitely has a momentum to it. You know, again, kind of reverting back to more business development roles coming on. Those are kind of our litmus test for, you know, three to six months down the road that folks feel like maybe they’re going to go out back out on the market and start acquiring and those sorts of things. So we’re starting to see that a little bit more. So, you know, I think overall, things seem to be heading the right way. At least there’s some hope there. I mean, obviously, time will tell and as things kind of clear themselves out. But, you know, I think folks are just going to continue to be a little bit more you know cautious in their hiring there’s definitely a lot of candidates out there to choose from and so I think that’s a good thing overall for the market because when they get in there they’re gonna be you know efficient and kind of bringing skill sets and experience in from other practices or other groups that you know can help them on the efficiency level but you know it feels like the momentum’s heading the right way and you know time will tell but it should hopefully be a much better year than 24.

Bill Neumann : Jon, if anybody in the audience wants to reach out to you for your assistance, whether they’re candidates or whether they’re looking to fill a position, what’s the best way to get in touch with you?

Jon Fidler: Yeah, uh, we’re not picky. So, uh, you can go to our, our website at fiddler and associates.com. Um, happy to give out, uh, you know, our, my email is Jay fiddler at fiddler and associates.com or feel free to text. That’s usually the best way to is, uh, our, you know, 5 1 2 5 5 0 8 6 0 4. So we’re, we’re happy to get in contact with whatever people are comfortable with. And hopefully we can, you know, help or at least provide kind of some perspective on the marketplace and do whatever we can to connect good folks.

Bill Neumann : Yeah, thanks, John. And we’ll make sure we drop all that information in the show notes. Rich, you said you’re not giddy, but you’re cautiously optimistic for 2025. So, you know, what are your thoughts?

Richard Blann: Yeah, so, you know, I think we’ve now eliminated a lot of the risk and uncertainty in the market that was, I think, preventing people from pulling the trigger and doing more M&A. With this administration change, there’s one thing that comes with it that we all as an M&A and investment banking community feel confident in, and that is The regulatory hurdles that looked like they were becoming more and more challenging to overcome are likely going to recede and there will be an easier glide path to getting deals done. I wouldn’t say we’re abandoning regulatory review and approvals and other required processes. But they’re becoming less onerous. And the administration has indicated that they want to see more activity and they want to be able to create an environment that facilitates that. So I think for those reasons, as well as a lot of what we talked about earlier, being. a significant amount of capital that’s available, really a void of M&A activity in the last 18 months, with the first and second quarters of 2024 being the lowest level of M&A activity in the healthcare services market. Certainly the DSO market has never been this quiet. It means that there’s a pent-up demand uh, for both buyers and sellers of opportunities that are going to come to market in 2025. Um, our pipeline has never been deeper. Um, you know, and, and we’re looking forward to, you know, increasing that and, and help it to facilitate what we think is going to be a very robust M&A market, uh, next year.

Bill Neumann : And Rich, if, if people want to reach out to you or find out more about DC advisory, how do they do so?

Richard Blann: Great. So our website is very simple. It’s dcadvisory.com. People can reach out to me directly at richard.blann, B-L-A-N-N, at dcadvisory.com.

Bill Neumann : Thanks, Rich. And Dr. Rowe, what’s up with you? I mean, you’re involved on the advisory side, so you’re working day in and day out with these DSOs. Talk a little bit about what you expect in 2025.

Dr. Roshan Parikh: three weeks or any small indication. I think the one word that I would use is confidence. I think there’s more confidence, or maybe to steal John’s word of optimism, I think that that’s there. Whether or not that perception creates the reality remains to be seen, but it is really nice to have Like Rich was saying a little while ago, there’s been private equity investment into DSOs for the last 30 years and the DSO playbook is tried and true. It’s a legacy PPM industry. failure aside, there is having confidence and optimism about the DSO market is definitely needed and should be there. And so it’s for 2025. And I think a lot of the, you know, DSOs and DSO leaders that I’ve talked to even in the last three weeks have an increased confidence and optimism about where things can go in 2025 and it comes down to execution. So now whether or not the perception will become the reality is really in the you know, doing the hard work. I mean, it’s easy to talk about it, but it’s like to be able to execute on your playbook, to be able to execute on your technology strategy, your integration. You know, investors are looking at businesses more closely than ever, and they’re looking for businesses that are integrated. And so I think that that emphasis is still there. And there’s obviously execution risk there. But having a confidence and optimism going into 2025 really is nice.

Bill Neumann : Great. And, Bro, if they want to reach out to you at DSO Strategy, how do they do so?

Dr. Roshan Parikh: Yeah. Um, we, our website is, is DSO strategy.com. Um, my email address is drrow at Roshan Parikh.com. So any, any one of those, I’m pretty active on, on LinkedIn. I, I usually get some, uh, great messages on there too, but you know, anything short of, uh, uh, snail mail, easily accessible.

Bill Neumann : Richard. That sounds good. And we’ll drop everybody’s contact info in the show notes. So we appreciate it. Great, great conversation. We probably could have gone on for another hour, but we got to go. So thank you, gentlemen, Dr. Rowe, Rich, and John. Appreciate the insights. Sounds like it’s going to be a good year in 2025, and we’re really looking forward to it. Until next time, I am Bill Neumann, and this is the Group Dentistry Now Show. Thanks for watching.