M&A Update: PE Deals Down 37%, But Not Dead

A practice that would have cleared $2.54 million in 2023 is closing at $2.02 million today, and nothing about the practice changed. Same collections, same chairs, same doctor. What changed is that the buyer stopped taking the seller's word for what the practice earns.

Dental private equity deal count fell 36.5% year over year in 2025, the steepest contraction of any healthcare services subsector, according to PitchBook's Q4 2025 Healthcare Services Report as reported by The Morning Grind. Every broker in your inbox is going to tell you that's a temporary dip and you should wait for the window to reopen. Our view: there is no window. The 2021 to 2023 pricing was a debt-cost artifact, not a valuation floor, and owners who sit on their hands waiting for 7x to come back are going to sell at 5x anyway, three years older, with three fewer years of compounding. Deals aren't down because buyers stopped wanting dental. They're down because buyers stopped believing your add-backs.

126 Deals to 67 Is a Story About Underwriting, Not Appetite

North American DSO M&A nearly halved between 2023 and 2025, with total deals falling from 126 to 67, and sponsor-backed buyouts and add-ons dropping from 83 to 46 over the same stretch, per ION Analytics' Mergermarket data. Read that second number carefully. Sponsor-backed activity fell 45% while total activity fell 47%. Private equity didn't retreat faster than the market. It retreated with it.

That distinction matters because it rules out the story most owners want to believe, which is that PE got spooked on dental specifically and will come back when sentiment turns. Sentiment isn't the problem. The problem is that when the cost of debt roughly tripled, every platform's model broke at the same time. A DSO that could borrow at 4% and pay 7x EBITDA for a $400,000 practice was making a different bet than one borrowing at 9%. The second buyer needs either a lower entry price or a much higher confidence level on the earnings it's buying. Most of them chose both.

So the deals that are still closing are not the deals that got lucky. They're the deals where the earnings survived scrutiny. That's the whole story of 2025 and it's the whole story of what you should do next.

The Mistake: Treating 2023 as a Price Floor Instead of a Price Peak

The specific error, and we see it most often in owners between 55 and 63 with $1.2M to $2.5M practices, is anchoring on a number a colleague got in 2022. Somebody at the study club sold at 6.8x. That number is now the owner's internal reserve price, and every offer below it gets read as an insult rather than as market.

Here is why that anchor is poison. It doesn't just cost you the deal you turned down. It costs you the three years you spend waiting for an offer that isn't coming, during which your hygiene department ages out, your best associate leaves for a DSO with a real benefits package, and your equipment depreciation schedule runs out on a CBCT you now have to replace at your own expense right before a sale. Owners who anchor high don't sell high. They sell late and lower, and they fund the delay themselves.

The second version of this mistake is subtler and it shows up in owners who are genuinely sophisticated about their P&L. They build a beautiful add-back schedule, present adjusted EBITDA with confidence, and then get blindsided when quality-of-earnings work strips a third of it out. They didn't do anything dishonest. They just applied 2021 diligence standards to a 2026 buyer. Nobody is taking the schedule at face value anymore.

A $1.85M Practice Loses $522,500 Between the LOI and the Close

Run the actual numbers on a general practice collecting $1.85 million with the owner producing about a third of it.

The owner's advisor presents adjusted EBITDA of $462,500, a 25% margin.

Inside that number sit $125,000 of add-backs: $55,000 in salary for a spouse who handles "marketing and HR" without a defined role or time records, $18,000 of vehicle lease and fuel run through the practice, $22,000 in travel coded as continuing education that includes family airfare, and $30,000 in one-time legal fees from a partnership dissolution.

The buyer's quality-of-earnings team allows the $30,000 legal item and disallows the other $95,000, because none of it has documentation that would survive an audit and the spouse role can't be tied to a replaceable job description.

Defensible EBITDA lands at $367,500.

At a 5.5x multiple, the presented number supports a $2,543,750 purchase price.

The defensible number supports $2,021,250.

That is a $522,500 gap, and it appears after the LOI, after the owner has mentally spent the money, and at the exact moment the owner has the least negotiating power in the entire process.

Now run the fix. Take the spouse off payroll, move the vehicle to personal, and stop running family travel through CE. The owner loses nothing in real after-tax cash, because that money was already income; it just changes which pocket it flows through and which line it sits on. Eighteen months of clean books later, documented EBITDA is $462,500 for real, and the same 5.5x supports $2,543,750.

Ninety-five thousand dollars of cleanup buys $522,500 of purchase price. That is a 5.5x return on bookkeeping discipline.

We'd take that trade every time, and we'd take it over waiting for multiples to recover, because multiple expansion is something you have no control over and add-back defensibility is something you control completely. If you are 18 to 36 months from a transition and your add-back schedule has a line item you'd be embarrassed to defend to an auditor, that line item is costing you roughly five and a half times its annual value.

Oral Surgery Up 9.1% Tells You What Buyers Are Actually Buying

In a year when dental PE deal count fell 36.5%, oral surgery was the lone subsector that grew, up 9.1%, per the same PitchBook data. That is not a random survivor. Oral surgery has referral-driven demand that doesn't depend on one doctor's chairside personality, procedure-level pricing that holds up under payer pressure, and case mix that a buyer can model without trusting a marketing story.

Translate that into a general practice and you get the actual buyer checklist. Is production concentrated in the selling owner? Can the schedule survive the owner cutting to two days? Is the hygiene department producing independently and at a defensible rate? Is the payer mix stable or is 40% of it sitting in one PPO contract that renegotiates next year?

Owner-dependence is the single largest discount factor in the current market. A practice where the selling doctor produces 60% of collections isn't worth 5.5x to anybody, because the buyer is underwriting a transition risk they can't price. The same practice with production split across an associate and a strong hygiene program gets treated as a going concern rather than a personality. If you have 24 months, hiring and retaining a productive associate is worth more to your exit number than any marketing spend you could make.

78% Expecting a Recap Is the Real Signal in the Noise

Here is the number that should change how you read the downturn. In TUSK Practice Sales' Q2 2026 Dental Market Report, 69% of DSOs surveyed expect to increase acquisition activity in 2026, and the share of buyers anticipating a recapitalization within 12 to 36 months rose to 78%.

Read the second figure as a forced-action indicator. A recap is how a sponsor returns capital to its fund. Sponsors who bought platforms in 2019 through 2021 are now past the typical hold window, and they cannot recap into a flat story. They need growth, and organic growth in dental is grinding, so they need acquisitions. The 2025 slowdown wasn't a decision to stop buying. It was a repricing pause, and the clock on the fund never paused with it.

That is why we don't read 67 deals as the new normal. We read it as the trough of a repricing cycle in which buyers rebuilt their underwriting standards, and the volume comes back at the new standard rather than the old price. If you're a seller, the implication is uncomfortable but clear: the buyers will return before the multiples do. You will get more calls at prices you don't love, and the owners who did the cleanup work will be the ones converting those calls into closings.

The 27% Number That Sets Your Buyer Pool in 2030

Consolidation didn't stall on the demand side. ADA data shows 13% of U.S. dentists were affiliated with a DSO in 2022, up from 10.4% in 2019 and 8.8% in 2017, and the figure hits 27% among dentists less than five years out of school.

That last number is the one to sit with if your exit plan is a private sale to a young dentist. More than a quarter of new graduates are starting inside a DSO, and the associate who might once have bought your practice at 40 is now on a corporate compensation track with a benefits package and no personal guarantee. The private buyer pool for a $1.8M general practice is thinner every year, and it is thinnest for practices in secondary markets with aging equipment.

Our view: if you've been telling yourself an associate will eventually buy you out, you need a signed timeline, not an assumption. An unwritten succession plan is not a plan, it's a hope with a mortgage attached.

Do This Before Your Next Broker Call

Pull your last 24 months of P&L and mark every add-back you could not defend to a stranger with a spreadsheet, then price each one at 5.5 times its annual value so you can see what it's actually costing you. Move the indefensible items off the practice books this quarter, not next year, because the clock on clean trailing twelve-month statements starts the day you make the change. Calculate what share of collections the selling doctor produces, and if it's north of 50%, treat associate recruitment as your highest-return capital project. Then run your valuation at 5.0x, 5.5x, and 6.0x on defensible EBITDA so that when a call comes, you already know your number instead of borrowing someone else's from 2022.

What we're watching next: whether the 78% recap expectation actually lands in 2026 or slides another year, because a second delay would push platform sponsors toward distressed portfolio pruning rather than new acquisitions, and that would change our call on timing. We'd also revise if oral surgery's 9.1% gain reverses, which would suggest the issue is dental demand rather than dental underwriting. Right now the evidence says underwriting.

If you want to see what your practice supports at today's standards rather than 2023's, work through the valuation math on your own numbers: enter your collections, your true defensible EBITDA, and your owner production share, and run your own numbers before a buyer runs them for you.