If you’re following along, in the previous email I shared a bit about the “branded” strategy for DSOs.

Most of the Dentists I work with are looking to connect with a DSO that is using an “acquisition” strategy.

This is the most dominant operating model for DSOs.

The idea for these DSOs is to fully acquire a Dentist’s practice while keeping the pre-existing identity of that business in order to protect the goodwill that the Dentist has built up over many years.

Some DSOs which are acquisition focused will add de novo development - adding locations to fill gaps in local markets and to provide ownership opportunities to successful associates.

One of the largest and most successful acquisition-driven DSOs is Heartland Dental, based in Effingham, Illinois.

They were the first DSO to reach the threshold of 1,000 affiliated practices (achieved in Dec 2019). They now operate in 37 states.

Compared to other acquisition-driven DSOs, they have a more prescriptive business model. One of the first orders of business for a new affiliate is for the dentist and his or her entire team to go to Effingham to attend “Heartland University” to learn and become acquainted with Heartland’s operating approach, policies, and procedures.

I find that some feel this approach is too confining, while other dentists find the approach quite attractive.

One thing to note about Heartland is that they are backed by private equity partner Kohlberg, Kravis, & Roberts (KKR), a firm with $218 billion of assets under management.

Large DSOs like this tend to fall in a category called “enterprise.” Not all DSOs are operating at this scale. And not all operate with private equity financing. Some smaller DSOs will operate using debt and bank financing.

It’s something to be mindful of because, in the long and short term, private equity financing tends to be more stable than bank financing.

You’ll be facing these details if you decide to partner with an acquisition-focused DSO.