The Group Dentistry Now Show: The Voice of the DSO Industry – Episode 205

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Welcome to The Group Dentistry Now Show: The Voice of the DSO Industry!

Jake Berry, Chief Development Officer at MB2 Dental, discusses the evolution of the DSO landscape and the unique partnership model that MB2 has pioneered. In this episode we explore:

• • The history and founding of MB2 Dental.
  • The differences between traditional DSOs and MB2’s DPO model.
  • Insights into the current state of the DSO market.
  • The recent recapitalization event and what it means for MB2.
  • The importance of doctor retention.

To learn more about MB2 Dental visit https://mb2dental.com/

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DSO podcast transcript:

Welcome to the Group Dentistry Now show, the voice of the DSO industry. Join us as we talk with industry leaders about their challenges, successes, and the future of group dentistry. With over 200 episodes and listeners in over 100 countries, we’re proud to be ranked the number one DSO podcast. For the latest DSO news, analysis, and events, and to subscribe to our DSO weekly e-newsletter, visit groupdentistrynow.com. We hope you enjoyed today’s show.

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Bill Neumann: Welcome everyone to the Group Dentistry Now show. I’m Bill Neumann and appreciate everybody tuning in today. You know, I was kind of thinking back and I thought, gosh, we should have had somebody from MB2 Dental on the podcast before. And I think this is the first time, Jake. I’m apologetic that we haven’t had somebody on before, but I’m glad that it’s you if it’s going to be a first time, first timer. And I’ve known Jake Barry for quite a while. I think I met you, gosh, maybe when we both got into the dental, well, at least the DSO space way back when in like 2017 timeframe. Jake Barry, he is the chief development officer at MB2 Dental. Thanks for being here, Jake.

Jake Berry: Thanks for having me, Bill. It’s good to be on. And yeah, I think we met, it might’ve been at a Dykema conference before Dykema was at the Gaylord in Denver. So we’re going back quite a few years now.

Bill Neumann: Yeah, it is. And yeah, it may have been the one when they used to do it in Dallas, maybe at the Omni or maybe even before that. So it’s, yeah, now it seems like it’s gonna be in Denver for the foreseeable future from what I hear. And things have changed a bit since then.

Jake Berry: Yeah, yeah, the market’s changed. MB2’s changed. I think the DSO landscape has changed. Dentistry, to some extent, has changed. So we’ve seen a lot of evolution since then. Obviously, we went through the COVID pandemic. That upended things for quite a while. So I think since you and I first met, it’s a very different world out there.

Bill Neumann: Yeah, for sure. I’ll just do a brief read your bio and then you can fill in some blanks. And then I’d love to get into a little bit of a history lesson on MB2 Dental. I think everybody in the industry, almost everybody, maybe there are a couple of people that don’t, but they know the name now, but they may not know a lot about the organization. Little bit about Jake’s background. Like I mentioned, he’s the Chief Development Officer at MB2 Dental. He has been there since 2017. He has broad experience in healthcare and M&A advisory, capital investment planning, financial planning and analysis. And he was in the military prior to all that in a leadership role. Jake, tell us a little bit about your background and then how you ended up in 2017 working with MB2 Dental.

Jake Berry: Yeah, I’ve been with MB2 for over eight years now, so it’s been a minute, Bill. But prior to MB2, as you said, I was in the military. I served in the Marine Corps. When I got out of the Marines, I went to business school. Not 100% certain which direction I wanted to go, but I ended up at a small investment bank in Dallas. doing all by side work within healthcare. And I did that for several years. And then the chief operating officer here at MB2, who is someone I worked with previously in banking, reached out to me to talk about a role with MB2. At that time, we were a fraction of the size that we are now, and we didn’t even have private equity backing. But that was kind of fortuitous. That was my segue from banking into into dental and that was now over eight years ago. So for the last eight years, I’ve been with MB2. I got to the group when it was still all doctor owned, there was no private equity investment. So I’ve seen a lot of the evolution and the change, not just within the dental space, but with MB2 specifically.

Bill Neumann: Can you give us a little, this’ll be good for me too, a little bit of background on how MB2 started and maybe take us up to present day. You had a recent recap event last year, so we want to make sure we spend a good amount of time on that since you were one of the few in the industry to get something done in 2024. But take us back to the early days of MB2, the founding of it.

Jake Berry: Yeah. Yeah. I mean, really, it seems hard to believe, or it just seems so long ago, but MB2 really started out of a single private practice in Dallas back in 2007. Dr. Villanueva, who’s CEO to this day, was the founder of the group, but this started from his first private practice. And in the earliest days and kind of at the earliest inception point, the basic idea was to establish a group with friends to create joint ownership in each other’s practices and then share across the corporate overhead. It was really that simple. And the idea was so that the doctors could have ongoing distributions or mailbox money, as they called it 15 years ago, and help reduce their overhead. There was never an intention to build a platform to monetize through institutional capital. It was just like, hey, let’s bring our friends together. Let’s invest in each other’s practices and create a better way to practice for each other. That was it. And so over the first 10 years of MB2, 2007 to 2017, The group grew in size from two locations to 85 locations, all joint venture partnerships, doctor to doctor. The infrastructure of the group was built, by the time I got to MB2, there was over 80 employees on the corporate team, on the central support team, meaningful cashflow out of the business. It was a sizable company, albeit a little bit of a unique model compared to what most of healthcare had experienced. And so our first real meaningful event as a group was when we recapitalized behind a private equity investor called Sentinel Capital in October of 2017. That’s really what kind of set us on the path we’re on today. That reorganized our corporate structure. It formalized the partnership structure that we have to this day. And most importantly, it gave us the growth capital to expand beyond Texas and the few states we were in back in the teens. Once we launched with Sentinel Capital, we tripled the size of the group. We went from basically 85 locations to over 250 locations and recapitalized with Charles Bank, which is a middle market private equity fund out of Boston. in January of 2021. So about a three and a half year timeline, less than three and a half years between the first and second recapitalization and behind Charles Bank and their support in the capital markets. We’ve again, basically nearly tripled the size of the business. Today we’re We’re just at about 780 locations today. And we recapitalized for a third time, taking a minority investment from Warburg Pincus in November of last year. So it’s been quite a run along the way. The group’s obviously grown exponentially. We think the model really resonates with doctors, and thankfully we’ve been able to return capital now three different times to our partners. But I think the one thing we’re really proudest of is the model hasn’t been sacrificed along the way, the culture hasn’t been sacrificed along the way, and the leadership team that was in place eight years ago before we had institutional capital is the same leadership team that’s sitting here today.

Bill Neumann: Yeah, so a bunch of things that I think of. Thanks for the history lesson. That was great. So you talked about the joint venture model initially. When did, and I think this lends itself well to, and a hat tip to your marketing team, I think MB2 Dental has just done some fabulous things with Just really creating, well, you were the original DPO, right? The first dental partnership organization. And I think that in a way that set you apart, I mean, now there’s certainly a lot out there that claim to be that or use that terminology, but you were the first. And I think that really stemmed from that JV model. Talk a little bit about that. That was pretty much from the get-go, that was the partnerships between the docs. It’s obviously sustainable and it seems very, very attractive for doctors. You being the chief development officer, you’re having these conversations probably every day with different docs. Talk a little bit about the DPO side of things. Was that a better way to convey what a joint venture was? How do you go from being JV, even though it’s really the same thing, to coining the term DPO?

Jake Berry: Yeah, that’s a really, really great question. I think, again, I go back to the comment I made, this group was never built for institutional capital. This group had a decade runway on its own, just behind doctor investment. before we took a dollar of capital from private equity. And so the mindset Dr. Villanueva had and the other doctors had was partnerships amongst doctors are very natural. Private practitioners have been doing that. for a long time now. And so the concept of going into partnership is a very logical step for many dentists. It just so happens with a group, we’re not bringing a clinical skill set to the table. We’re bringing a set of administrative skills, buying power, better data analytics, more business acumen to support the business. So the concept of sharing and ownership and aligning interest just naturally resonated with Dr. V and the other partners at the time. And I think as you can see through our growth, it resonates with a lot of other doctors as well. But to your point on sustainability, that is really at its crux why the joint venture model or the partnership model is so valuable. and so strong because you have shared alignment and shared risk and shared upside at the practice level. And I think if you give doctors ownership in their practice, you’re going to end up with a better business result. You’re going to end up with better clinical care. You’re going to end up with a happier team. All around, you get a better outcome across all stakeholders. And so early on, probably about 2018, I think it occurred honestly over the lunch table with Dr. V and a couple of our other partners. They said, listen, a DSO isn’t really a great descriptor of what we do. We’re really more of a dental partnership organization than a dental support organization. So the concept was to shift the emphasis from the S to the P, to reinforce with our partners, current and future, that yes, there’s support here, but this is more about the partnership itself. And so it is marketing and all that, but it is certainly an attempt to separate how we’re different and how our model is different from the traditional DSL model, which at the time was very important because the traditional DSL model was really all that was known when you go back eight or nine years. And now, as you referenced, there’s a lot of different models out there and there are some variations of the JV model itself.

Bill Neumann: Well, let’s dig into that a little bit, because I’m sure there’s some people listening, watching this that maybe don’t understand the difference between a traditional DSO and what, you know, at least let’s talk about the MB2 dental partnership, JV model. What is the difference between DSO and MB2?

Jake Berry: Yeah, so a traditional DSO, and this is, frankly Bill, this is true across a lot of healthcare consolidation, but the traditional DSO model acquires 100% of the ownership in a practice. Whether there’s a rebranding or the branding is kept locally, I’ll push that to the side, that’s not really at the core, but a typical DSO buys 100% of a practice, Generally speaking, the practice owner who is selling receives cash consideration and also receives consideration in stock in the parent company. And so from that point forward, the doctor doesn’t really have any ongoing economic interest in the practice. They’re paid as an employee. They’re paid for the chair side work they do. They’re generally entering into some sort of long term or intermediate term employment agreement with the practice. They’re not probably not engaging in a lot of the operational decisions. I think in most cases, they have some level of clinical autonomy, but their future upside, if you will, is tied to how the stock of the parent company performs. In the partnership model, the JV model like MB2, we’re not buying 100% of the practice. We might be buying 51% or 60% or 70% of the practice. And so it creates a model in which the doctor is retaining very real equity ownership interest in their business. We really emphasize to our prospective partners, this is not an exit strategy. This is you bringing us on as a partner in your business, and we still expect you to continue to run some of the very key aspects of your practice. And while we are here to support you and bring resources that you wouldn’t otherwise have on your own, this is a two-way street. This is like a marriage. And so the fact that doctors in the JV model retain a meaningful amount of minority interest in their practice means Not only are they paid for the chair side work they’re doing, but they should also be receiving profit distributions out of their practice. I go back to the alignment term over and over again. What I think should ring true in the JV model, unlike the traditional model is If the practice goes up, the doctor benefits from that. If the practice goes down, the doctor feels that too. And so having, you know, frankly, the most important stakeholder in all of this, the dentist, having a meaningful financial benefit through their own business ownership, we think is what’s most important to long-term sustainability.

Bill Neumann: That seems to really resonate with Dennis as well. So take me through. You mentioned a little variation on the different percentages. So is that the case at MB2, that certain partnerships you may buy more of a larger percentage of a practice or a group than others? And how is that determined?

Jake Berry: Yeah, that’s right. It really comes down to the economic terms of the transaction, what the doctor wants out of a deal and what we want out of a deal. And all those things have to come together and intersect to make a successful transaction. But many doctors approach us and they say, listen, I want to sell the least amount of equity in my practice as possible. I want to maintain a large chunk of equity because I’m going to be here for the next 15 years. So those are the doctors that shade more towards that 51 49% partnership. Many doctors have a certain financial goal. out of a transaction. They’re looking for a certain amount of cash or a certain amount of stock in the parent company that they’re looking to achieve. And so they’re willing to sell more of that practice level equity. In some cases, if there’s a certain risk profile on the business or we’re trying to ensure we’re creating a solid succession plan, we might change the percentage of equity that we’re buying. But the takeaway, Bill, is it is negotiable and it really comes down to what works for the doctor and what works for us.

Bill Neumann: So there’s a huge incentive for the clinician to make sure that the practice level or the group level that they owned or still own a percentage of, that that continues to grow. Now, at the MB2 dental level, are they, how do they, because they do have the ability to have equity at the parent company as well, and is that through the proceeds that they receive from MB2 reinvested in the organization?

Jake Berry: Yeah, that’s right. The most practical point for our partners to invest in the MB2 stock is through the initial partnership transaction. Almost every transaction we do, we are incorporating stock in MB2 as a currency in the transaction. And I reference back to the traditional DSL model that’s still quite pervasive today. That’s exactly how other groups do it as well. They’re funding the deal with cash in stock in the parent company, they just don’t have the continued retained interest at the practice level. So nearly all of our doctors are shareholders in MB2. If you look at the ownership of MB2, the parent company, doctors account for over 60% of the ownership in MB2. So while we do have private equity backing, our doctors have an enormous stake in the company itself. And going back to the alignment, you know, that gives doctors greater upside in the parent company, but it also ensures they’re incentivized at the local level. And I think our baseline position on on all of that is if you don’t have doctors incentivized at the practice level, and you don’t have a really solid alignment models that creates long-term retention of the most important stakeholders, the doctors, that could challenge the value of the parent company equity. And so we like to have alignment at both levels to ensure that doctors are maximizing their long-term wealth creation, but also benefiting directly from the work they’re doing in their own practice.

Bill Neumann: So you had a recent recap event, third recap, and Talk a little bit of, a couple things I’d like to know there, and I think the audience would like to know as well. I mean, one, maybe take us through the scenario. What happens if I’m a dentist partner when there’s a recap event? So that will be one thing I’d love to just have you address. But then also, you were one of the very few to actually get something done in 2024. I know there are a lot of groups that were trying to have something. I think there may have been two or three. organizations that got something done in 2024. I mean, there were mergers and acquisitions, but there were very few recaps. I think you were one and Rick Abene maybe had something occur, but beyond that, just not a lot of activity. And I think even in 2023, it was pretty quiet. Take us through that recap event. Maybe how did you get something done when others might not have been able to? And then also just the other question, that first question is what is a recap event like for a doctor partner?

Jake Berry: Yeah. No secret, it’s a really tough capital market environment out there. It’s been that way for a few years now. But I think more of an overarching narrative is that what the DSO space has gone through over the last four to five years, Bill, this has played out in dermatology, vet, eye care, anesthesiology, GI, I mean, any sector of healthcare, there has been a consolidation story over time. And I think the feedback we got from the sponsors we talked to is there is a growing concern that in healthcare, under a platform that is built on M&A, it’s like a game of musical chairs and sooner or later the music stops and someone, some investors left holding the bag. It’s very, very hard. And I, you know, I’d challenge the viewers or, or, and you probably have some view of the market too, Bill. Like if you look across healthcare consolidators, very, very, very few are able to grow from 50 locations to 150 to 400 to 800 and really scale. And, Part of it is because it’s really capital intensive and pursuing an M&A strategy is it’s risky. It’s subject to cost of capital. It’s very, very challenging to integrate and centralize and be efficient, especially in health care. And more importantly, if you’re buying some sort of healthcare practice, if you’re a provider-based business, keeping doctor retention high and aligning interest with the doctors long-term is really, really hard to do. And so I think when we went to market, we very much felt like there was a lot of skepticism from the sponsors we talked to. And again, at our size, we were talking to some of the larger cap sponsors. But there’s a feeling that, man, this is played out in other spaces, and we’re not sure, ultimately, the long game is going to look so good. And I think if you look at the DSO landscape today, I mean, depending on whose math you look at, I mean, the list we track, there’s well over 150. institutionally backed DSOs out there. I’ve heard numbers up to 250 DSOs, but there is a lot of DSO capacity in the market. And they’re all pursuing the same strategy. They are trying to acquire as much EBITDA as they can, hopefully integrate it, hopefully have the right alignment model with the doctors, and then flip it out in a recapitalization. And so I think any private equity investor, small cap, middle market, large cap, that’s going to be looking at these platforms is going to be asking themselves, is this platform sustainable? Are the doctors who have sold into this platform committed long term? Not just are they saying they’re committed, but show me they’re committed. What’s the alignment model? Is the leadership team battle tested and shown they can add value? And can this platform successfully integrate and operate the practices that they’re buying? There’s been a lot of talk over the last couple of years about organic growth. That’s certainly a key story. But Bill, I’ll tell you, like, And I think there was two core questions that we had to address in talking with sponsors throughout our process in 2024. The first is, what value do you bring to your doctors? I mean, the question we heard over and over is, how do you make the lives of your doctors better? The second question was, how do you repair their income? Walk us through how, over time, a doctor who sells into your co-op into your group can effectively rebuild their income. So this just doesn’t become like a successive transaction engine where doctors sell down over time and then just exit and leave a shell of a business. And so I think any group is going to have to talk about how they add value to their doctors and their practices and how they can repair income over time. So investors know they’ve got a group of long term committed doctors. So that’s kind of the long answer on the landscape. I guess I’ll pause and see if you’ve got anything. And I know you want to talk about what it looks like for MB2 partners, which I’m happy to get into.

Bill Neumann: Yeah, no, I want to, definitely want to dig, dig back into the, you know, the landscape a little bit more. And then also, I mean, I think kind of the big question is, you know, this little bit of the crystal ball question we’ll save till the end is, you know, what, what’s, what, what does the industry look like from a consolidation perspective? But on the partnership side of things, like who, who are the maybe not ideal partners, but who seem to be the best partners for MB2? Is there a certain, because I always kind of look at, you probably have a checklist of you have to have a couple of different things. You have to check a couple of boxes for it even to make sense to either party. So maybe talk a little bit about that.

Jake Berry: Yeah, I think the first thing DSOs always look at, and we’re no different from our seat, is the age of the doctor. But I think what’s become increasingly difficult to decipher, Bill, is what is the doctor’s true long-term intention with their practice and their ownership? So we talk to doctors who are 60 years old, and they tell us they want to work another 15 years. And it’s our job to figure out, OK, do they really mean that? Is that how this doctor is wired? Are they just saying that because they think that’s what we want to hear? Sometimes when we talk to a doctor who’s 40 years old and they say, well, I’m going to do this five more years, it almost feels like the younger doc is saying that because they know that’s what we want to hear or because the space has now been so preconditioned that DSOs want a five year commitment. Five years is a good planning factor, but honestly, The partners we want to bring on, Bill, are 7-, 10-, 12-, 15-year committed docs. We’re not a retirement exit strategy. I mean, certainly that is some of the motivation of doctors who join us, but the typical, prototypical doctor who’s approaching MB2 today is probably somewhere between the ages of 45 and 55. Average revenue size on the practices we’re closing on today are $2.5 million of collections. So these are larger practices that would have trouble selling to an individual doctor. And generally the mindset of the practice owner is, I’m not ready to exit. I don’t want to leave. I don’t want to give up my autonomy. I feel like I have more to pull out of this business, but I’ve done what I can do on my own and I need some help. And I also want to benefit from my partners within the group. That’s the genetic makeup of the doctor who approaches MB2, and that explains probably 90% of the doctors who join MB2 today.

Bill Neumann: That’s great. I’ll just drill down on a couple of those points, because I find it pretty interesting. So, you know, you were talking a little bit about the docs. It sounds like, you know, you’re wondering if they’re telling you something you want to hear, you know, whether it’s an older doc saying that they’re going to stay for 15 years or younger docs saying that they’ll stay for, you know, a lesser amount of time. Do you find that the doctors in general are more educated as far as what DSOs are looking for than they were, let’s say, in, you know, 2017, 2018, when you first started out?

Jake Berry: Yeah, I think for sure. Doctors are a lot more aware of some just basic concepts. Like when I started eight plus years ago, no one knew what EBITDA was. People still thought evaluation as a percentage of collections. That has changed and that has changed maybe to an extreme bill. I think while doctors are much better educated or have access to more information, they also have access to a lot of misinformation. And so I think there’s as much education has taken place maybe to the betterment of the market. There’s also a lot of bad information out there that has caused some confusion as well. I think there’s still a huge cross-section of doctors who haven’t heard of any of these concepts. I remember, I think it was 18 months ago, I went and did a continuing education class for a study club of one of our partners. I won’t say where, but I felt like it was a really good presentation. I got into EBITDA. I got into how valuation works. I talked about the DSO landscape. But the critical mistake I made is I didn’t really kind of pull the audience before I started. And so I got to the end and I said, hopefully this information was helpful. By the way, how many of you have heard of the term EBITDA before? and a room of 15 doctors, not one hand went up. So I think as much time as you’ve invested, Bill, as myself, other DSOs, the brokers, the lawyers, the consultants, there’s so much out there that didn’t exist back in 2017 or 2018, but dentistry is still a huge profession and there’s a large number of dentists who just aren’t really paying attention to this. And so some of this material is still brand new to them.

Bill Neumann: Yeah, we find that incredible, but we live in this bubble, right? There is that assumption that they know this, and I think more definitely do, but a lot of them are out there just being dentists and being, in a lot of cases, very, very successful, but they’re focused on clinical and the day-to-day and probably not necessarily interested in learning about the business side to a large degree. How about dentist entrepreneurs? So you talked about the typical group that you look at or the typical practice. These are large practices. So are you finding more doctor-owned, I would call them like private group practices where they might have like three, four, five locations, or maybe just these super single location practices that are just really cranking it out as far as whether they’re doing multi-specialty, they have multiple docs at one location. Are you seeing a growth in that, those doctor-owned, doctor-led practices?

Jake Berry: You know, it’s no, the short answer Bill is no. It is rare we see a multi-site portfolio. Certainly we do. We encounter doctors every month who have built two, three, four location groups on their own. But I think as difficult as it is for DSOs to manage their portfolio under professional business management, It’s really challenging for a doctor to manage a multi-site portfolio. They’ve got to deal with doctor turnover, they’ve got to deal with the cost creep on staff wages, they’ve got to deal with incorporating technology and improving services to their patients across not just one location, but three or four or five. And so my running hypothesis on this is the reason we don’t see more of those is that the most successful practices that are the most profitable, where the doctors who have the most EBITDA and the most room for improvement are those successful single locations where a doctor really has their hand around their business operations, and they know what levers they need to pull to improve. And those three, four, five location portfolios, you know, you often end up with, you know, one or two locations that are really good. And then, you know, one or two or three locations that frankly, aren’t investable. And so oftentimes, when those doctors have approach us, we’ll say, listen, you’ve got two or three really great locations. We are willing to partner with you on those, but you also have one or two that are losing money. And we simply don’t want to make that investment because we don’t want to assume the risk of a turnaround operation on, frankly, a practice that may not ever be suited for traditional DSO ownership or partnership.

Bill Neumann: Yeah. Thanks. That’s very honest. And these are things that we don’t necessarily hear about. We know it’s happening and probably happening a lot more where there are docs and this is probably why they’ve come to you because they’re at a point where they were doing really well with maybe one or two locations and then they just maybe just added a practice or two. And all of a sudden, you know, working harder, making less, more, more headaches and going, I, you know, I, obviously, we need out, we need to figure this out. So that’s, that’s, that’s really honest. And I think it’s, it’s great insight. As we start to wrap things up here. I’d really like to kind of get your feel for, because it’s not just the smaller Dr. Own, Dr. Lead groups that are having this challenge. There are some big groups out there that probably have a bunch of practices that they, in some cases, might need to offload. So what does the future of consolidation look like in the industry? And maybe we’ll incorporate two questions. And just M&A and Dental, Maybe we start, hold on. Let’s start off with where is the industry now? This is always a big question and a lot of it is the definition, what’s a DSO. But do you have a feel for like as a percentage of the industry, how much is multi-site? Three locations and up or whatever that cutoff is that the industry looks at as multi-site.

Jake Berry: Yeah, I don’t know. At the DICOMA conference last summer, I think the number that was thrown out is there are now 250 DSOs. Like I said, the list we track of DSOs that are 10 locations or more and have some form of institutional capital behind them, that’s more like 150 groups. And that accounts for 16,000 locations. I wouldn’t define a group as three locations. In my head, I kind of start the math at 10 locations and up. But I think the analysis we did, the market analysis we did in 2024 is there’s 136,000 dental practices in the U.S. There’s 200,000 dentists. So I think when you account for practices that just aren’t investable or maybe they’re government health clinics or things like that, I don’t think the consolidation is quite as advanced as people think it is. I’ve heard 25 to 30% thrown around, I think it’s probably closer to 20 to 25%. And when you look at the top 150 in the DSO list, that only accounts for about 16,000 locations. So I think there’s still a ton of fragmentation in dentistry. I don’t think it will ever fully 100% consolidate. I think the beautiful thing about dentistry is doctors will still be able to thrive in private practice. I’m not going to say it’s easy. I understand there’s a lot of business challenges there, but I think doctors will still be successful in private practice 10, 20 years from now. I think the pace of M&A is slowing. I think as many of these DSOs have decided to focus on organic growth or have decided to focus on integrating, you know, the big binge of M&A that occurred in 2021, 2022, 2023, or frankly capital constraints and the increased costs of capital. I think those are all things that are gonna slow down DSO’s willingness to dump a lot of capital into new acquisitions. I think also, you know, unfortunately there’s been some defaults, there’s been some failed recapitalization, some lenders have had to take over. Those stories now become more public. And so doctors are more aware of that. I think when you go back to 2020, 2019, 2020, 2021, you heard the term, you know, selling to private equity for a multiple, doctors wanted to make generational wealth. I mean, those are all aspirational financial goals, but unfortunately that’s not necessarily the reality. It’s really hard to achieve that. And so I think doctors now probably taking more of a moderated view on what they would want to get out of a DSO transaction and which group they’re going to trust with their life’s work in terms of the future economics. So I think individual tuck in M&A across DSOs will slow some. I think, you know, we look back across our last few years, it’s basically flat, kind of a little bit up and down, but our M&A has been quite consistent since 2020 through the end of 2024. Now, the issue I think you’re raising is there’s a ton of middle market groups out there that are somewhere between 40 and 120 locations. I think what remains to be seen over the next one, two, three years is how many of those groups can have a successful exit, a successful recapitalization behind a financial buyer. And so there’s going to need to be a large appetite across middle market private equity to invest heavily in those DSOs. And if that doesn’t happen, then I think their option is to sit and wait or find a strategic buyer. And as I look across the DSO landscape, I think there’s not a ton of DSOs who are well positioned or well capitalized to execute on a larger M&A strategy. Meaning they’re not buying individual practices. They’re buying, you know, groups of 40, 50, a hundred locations. That, that takes a lot of capital. That takes a lot of know-how and it takes a lot of infrastructure, um, to integrate a company that big and then operate it.

Bill Neumann: Yeah, we’ve seen a couple of those happen over the past four years and there hasn’t been a lot of activity from those organizations since those big acquisitions because it does take so much time, the integration. So yeah, you’re right. I think, well, it’s fascinating. It’s great insight. And one thing I will say is, we do our DSO deal roundup every month here. Kim Larson, she’s the one that’s diligent about getting all that information, whether it’s publicly available or whether somebody like an MB2 shares it with us. You have been one of the more consistent, if not the most consistent group out there. where every single month there are seven, eight, ten deals that go on. Sometimes they’re single practices, sometimes there are two or three locations, but there’s a lot of consistency. So I think that’s a testament to the model and the brand that you’ve built. And to your point, which I didn’t really think about, but you have people that have been there from the beginning as far as the corporate side of things. Your C-suite is pretty much intact from the inception of the organization. And that really is a testament to, I think, what you’ve built there. So yeah, super great conversation. I think the audience and I’ve certainly learned a lot. Jake, if people want to find out more about MB2 Dental or they want to reach out to you, what’s the best way to do that?

Jake Berry: Yeah, I mean, I think our website provides a ton of resources. We’ve tried to put out as much thought content as we have been able to over the last couple of years on a variety of topics. So I would encourage any doctor to go to our website and look at some of the educational materials we’ve put up. We have our own podcast in which we bring on thought leaders, we bring on MB2 executives, we bring on industry veterans to talk about various topics. Again, the idea there is knowledge sharing. So I think any private practitioner could listen to our podcast on a range of topics, pick up something new. And we try to stay pretty active on social media, you know, just pushing the latest on MB2, but any of those paths are going to bring them to a spot where they can send us their name and information if they want to talk to us. We’re happy to do it. We talk to 2,500 dentists a year. Obviously we don’t get to the closing day with 2,500 dentists. So we’re more than happy to just have a conversation about the market or about our partnership model or about how the economics could work out or even just present a valuation to see if it makes sense for the doctor.

Bill Neumann: Well, that’s great. And it’s mb2dental.com is the website, right? That’s right. That’s right. Okay. And then what we’ll do is we’ll drop the link to the podcast in the show notes so people have access to that. And your LinkedIn handle will do that. So if people want to reach out to you and talk to you a little bit. Great conversation, Jake. Really, really appreciate it. Next time, we’ll make sure that we don’t have, again, I know we’ve done, ton of articles on you before. I can’t believe we haven’t done a podcast. This certainly won’t be the last time we do a podcast with you or somebody from your team. That’s it, everybody. Appreciate your time today. Thanks for listening and watching us. Until next time, this is the Group Dentistry Now Show.

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