The dental industry has seen significant shifts in the world of dental support organizations (DSOs). While some DSOs have successfully achieved recapitalization events—two last year and two already this year – others are struggling. Several major players have indicated plans for recaps in 2025, signaling continued positive trend for DSO-affiliated doctors and their investors.

In the midst of the positive news of recaps it is important to note that not all DSOs are created equal, and some may never reach a recap event.

The gap between thriving DSOs and those on the brink of failure has never been wider. Yet, struggling DSOs are still actively acquiring practices, often making promises they cannot keep. Many practice owners don’t realize some buyers may not survive long enough to deliver on the deals they’re offering. Without the right guidance, sellers risk making a deal with a buyer who lacks the financial strength to ensure a long-term transition.

The Rise of “Zombie DSOs”

“Zombie DSOs” are organizations that continue acquiring practices despite lacking the financial strength to complete a recap event. They may be over-leveraged, operationally inefficient, or unable to scale profitably. While these DSOs appear legitimate, they often exaggerate their prospects, including claims of an imminent recap that may never materialize.

If you’re considering an offer from a DSO, ask: Will they actually reach their next recap— and when?

Nearly every buyer claims their recap is “just around the corner” or “one to two years out.” In many cases, this simply isn’t true. Many DSOs rely on continued acquisitions to stay afloat, meaning sellers risk tying their financial future to an unstable buyer. If that buyer fails, it could impact a seller’s earnout, deal structure, and long-term security.

The Maturing Market: A Longer Recap Timeline

As the DSO market matures, recapitalization events are taking longer to achieve. This shift has major implications for practice owners.  Recent data estimates that there are 37 PE-backed DSOs that are 5 years or more into their journey to a recapitalization event. 17 of those 37 are at greater than 7 years.

Unlike the early days of DSOs, when recap events happened quickly, today’s environment demands patience. Investors are more selective, growth expectations are higher, and economic conditions are more uncertain. If you’re planning your exit, consider how long your buyer will take to reach a recap—and what that means for your financial timeline.

Selling to the wrong DSO at the wrong time could leave you locked into a deal with a buyer that struggles to deliver, potentially impacting your financial upside. This is why working with an experienced advisor is crucial.

The Role of the Right Advisor

The risk of selling to the wrong DSO has never been greater. The right advisor can help you separate financially sound DSOs from those that are struggling.

What the Right Advisor Will Do for You:

• Vet potential buyers – Not all DSOs are equal. A skilled advisor will have deep industry insights into which groups are thriving and which are struggling.
• Analyze the recap timeline – A strong DSO should be able to provide clear, data-backed insights into their path to recap, rather than vague promises.
• Protect your financial future – Selling to the wrong buyer can mean lower valuations, unfavorable deal structures, and risk to your long-term payout.  An advisor ensures you receive the best possible outcome.

A trusted advisor will also assess deal structures, ensuring you don’t agree to terms that look good on paper but fail to protect your interests in the long run.

Key Takeaways for Practice Owners

As the DSO market evolves, practice owners must be aware of the risks associated with selling to the wrong buyer.

1. Some DSOs are misleading. They claim a recap is imminent when, in reality, they are using acquisitions as a way to stay afloat.
2. The gap between successful DSOs and struggling ones has never been wider. If you’re speaking with a DSO; they may not survive long-term—even if they say otherwise.

3. The right advisor is essential. An experienced M&A advisor ensures you sell to a stable, financially sound buyer who can deliver on their promises.

The stakes are high when it comes to selling your practice. With the right guidance, you can make a decision that protects your financial future and your practice’s legacy. Don’t let the wrong buyer determine your future—work with an expert who can secure the best possible outcome.