January 18, 2022
A Lookback at Dental Industry Trends in 2021, Part 2
To say 2021 was unpredictable would be an understatement, even in the world of dental practice transitions, including how to navigate the process and other big-picture topics. However, we took a stab at making predictions for what was to come, some of which came true, and some of which didn’t pan out. We continue our lookback at how the world of dental practice transitions unfolded in the last year.
Joining a dental service organization
Fewer legacy dental service organizations (DSOs) will be buying practices at this point because they need to concentrate their efforts on managing the ones they have. Smaller DSOs, small business investment company-backed DSOs, new private investment-backed DSOs and family office-backed DSOs will emerge as frontrunners when it comes to buying. Legacy DSOs have continued to buy at a breakneck pace with increased attention on emerging groups.
Dental practice mergers and acquisitions moving forward
The impact of COVID-19 nearly halved the number of dental acquisitions in 2020 compared to 2019, but this is consistent with private equity acquisitions in general in 2020. Even more, 2021 private equity acquisitions of dental companies seems on pace with 2019. Dentistry has been a staple of private equity investment for two decades, yet the space is still seeing new platforms and strategies emerge. With several private equity-backed DSOs having grown to nationally dominant players, dentistry may see significant terminal exits in the coming years, which could include IPOs and sales to payers or other strategies.
Capital gains tax reckoning
The capital gains tax reckoning is still coming — just not yet. The plan sets the top rate for taxing capital gains — money earned from the sale of assets such as stocks or property — at 25%, up from 20% under current law. That’s far short of the 39.6% rate — or 43.4% including the surtax — U.S. President Joe Biden proposed for those earning $1 million or more.
Decrease in dental care spending
We predicted U.S. dental care spending to decline from 31% to 38% in 2020, and anywhere between 0% to 20% in 2021 compared to pre-COVID-19 estimates. While dental care spending did decrease, it was not at the dramatic rates predicted. National dental expenditures decreased by 1.8% — from $145 billion in 2019 to $142.4 billion in 2020.
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