The Great DSO Pullback: Why Dental Practice Valuations Just Hit a Five-Year Low

Dr. Sarah Martinez received three acquisition offers for her thriving Sacramento practice in 2022—each one more aggressive than the last. The highest bidder, a regional DSO backed by Carlyle Group, offered her 8.2x EBITDA with a hefty earnout package that made her calculator smoke.

Fast-forward to this past January, and Martinez is fielding calls from the same DSOs offering 5.1x EBITDA—if they're calling at all. "It's like someone flipped a switch," she tells me from her office, still decorated with the congratulatory flowers from her 25th anniversary celebration. "The same practices that were feeding frenzies three years ago are sitting on the market for months."

Martinez isn't alone. According to data from Practice Transition Analytics, dental practice acquisition volume dropped 43% in 2025 compared to 2022 peaks, while average EBITDA multiples fell from 7.8x to 5.4x—the lowest levels since 2019. But here's what most practice owners don't realize: this pullback might actually be the best thing that's happened to dentistry in years.

The Numbers Don't lie—But They Tell a Complex Story

The DSO acquisition slowdown stems from a perfect storm of financial headwinds that began in late 2023. Private equity firms, which fueled much of the dental consolidation boom, are grappling with borrowing costs that have tripled since the Federal Reserve's aggressive rate hikes. The average cost of debt financing for dental acquisitions jumped from 4.2% in 2022 to 11.7% by mid-2025, according to Healthcare Finance Partners.

"We're seeing private equity groups that were writing checks with both hands suddenly become very, very selective," explains Dr. Michael Chen, managing director at Dental Practice Advisors and former CFO of Pacific Dental Services. "The math that worked at 3% interest rates falls apart completely at 12%."

But the interest rate story only explains part of the equation. A deeper analysis reveals that many DSOs expanded too aggressively during the post-COVID boom, acquiring practices at unsustainable multiples without properly integrating them. Aspen Dental, for instance, closed 47 locations in 2025—their largest contraction since the company's founding.

"The DSOs that survived 2025 are the ones that focused on operational excellence rather than growth at any cost. That's actually created a healthier acquisition environment, even if it's smaller." —Dr. Jennifer Walsh, Dental Economics Research Institute

The result? A market correction that's forcing both buyers and sellers to recalibrate their expectations dramatically.

Why Lower Valuations Might Save Your Practice

Here's the contrarian view that most practice transition advisors won't tell you: the current DSO pullback might be the best thing to happen to independent dentistry since the invention of the high-speed handpiece.

Dr. Jennifer Walsh, director of market analysis at the Dental Economics Research Institute, has been tracking practice performance metrics across different ownership models since 2018. Her findings challenge the conventional wisdom about DSO partnerships. "Practices that sold to DSOs at peak valuations in 2021-2022 are actually underperforming their independent counterparts in patient satisfaction, staff retention, and—surprisingly—profitability," Walsh notes.

The reason? Many DSOs paid such high multiples that they had to implement aggressive cost-cutting measures and patient volume targets to justify the acquisition prices. Practices that seemed like golden geese at 9x EBITDA became albatrosses at 4% profit margins.

Meanwhile, independent practices that resisted the siren call of easy money have quietly strengthened their operations. They've invested in technology upgrades, improved their patient experience, and built more sustainable business models. When the next acquisition cycle begins—and it will—these practices will command premium valuations from a more mature, financially stable buyer pool.

The New Acquisition Reality: Quality Over Quantity

The DSOs that survived 2025's shakeout aren't the same animals that dominated the 2020-2022 feeding frenzy. They're smaller, more focused, and significantly more sophisticated in their approach to practice integration.

Take Bright Dental Partners, a mid-market DSO that bucked the trend by actually increasing its acquisition pace in 2025. CEO Thomas Rodriguez attributes their success to a fundamental shift in strategy. "We're not buying practices anymore—we're buying dentists," Rodriguez explains. "The practices that excite us now are the ones with strong clinical leadership, established patient relationships, and room for organic growth. We'll pay a fair multiple for that, but we won't overpay for real estate and aging equipment."

This shift has created interesting opportunities for practice owners who previously felt priced out of the market. Dr. Lisa Park, who owns a three-location group practice in suburban Denver, found herself in multiple bidding wars when she tested the market in 2023. The winning offers all came with strings attached—earnouts tied to aggressive growth targets, non-compete clauses that would have prevented her from practicing within 50 miles of her own offices, and operational requirements that would have fundamentally changed how she practiced dentistry.

When Park re-entered the market in late 2025, the landscape had completely shifted. "The offers were lower, absolutely," she admits. "But the terms were so much more reasonable. The DSO that ultimately partnered with us actually wanted to keep our existing systems and processes because they were working. They saw our practice culture as an asset, not an obstacle."

What This Means for Your Exit Strategy

If you're a practice owner contemplating a sale or partnership in 2026, the new market dynamics require a completely different approach than what worked three years ago.

First, forget everything you heard about seller's markets and bidding wars. Today's successful practice sales are collaborative partnerships built on operational compatibility rather than financial engineering. DSOs are looking for practices that can demonstrate consistent patient growth, strong clinical outcomes, and efficient operations—not just impressive revenue numbers.

Second, the timeline has lengthened considerably. Where practice sales once closed in 60-90 days, today's transactions typically take 6-9 months from initial contact to closing. DSOs are conducting deeper due diligence, and financing contingencies are more common.

Third—and this might be the most important shift—successful sellers are thinking like buyers. They're evaluating potential DSO partners as carefully as DSOs evaluate them. Dr. Martinez, the Sacramento practice owner we met earlier, ultimately decided against selling after spending six months in discussions with three different DSO groups.

"I realized that none of them really understood what made our practice special," Martinez reflects. "They saw our numbers, but they didn't see our relationships. They wanted to optimize our operations, but they couldn't explain how that would improve patient care. At 5x EBITDA, the money wasn't compelling enough to risk what we've built."

The Private Equity Perspective: Patience as a Strategy

Interestingly, many private equity firms view the current slowdown as a strategic opportunity rather than a crisis. KKR's healthcare investment team, which backed Heartland Dental's expansion, has been vocal about their long-term bullish outlook on dental services.

"We're seeing this as a market normalization, not a permanent downturn," notes KKR partner David Kim in a recent investor call. "The fundamentals of dental services—aging population, increasing cosmetic demand, insurance coverage expansion—haven't changed. What's changed is pricing discipline, and that's ultimately healthier for everyone."

This patience is creating opportunities for well-capitalized DSOs to acquire quality practices at reasonable valuations while their competitors retreat to the sidelines. But it's also giving independent practice owners more leverage in negotiations and more time to optimize their operations before making a sale decision.

Looking Forward: The 2027-2028 Outlook

Several factors suggest that DSO acquisition activity will rebound in 2027-2028, but the market will look fundamentally different than the pre-2023 boom years.

Interest rates are expected to stabilize in the 6-8% range, making debt financing more predictable if not cheaper. More importantly, the DSOs that survived the 2025 shakeout have proven business models and stronger balance sheets. They'll have the capital and operational expertise to pursue strategic acquisitions rather than growth-for-growth's sake deals.

For practice owners, this creates a compelling strategic window. Those who use 2026 to strengthen their operations, improve their financial metrics, and build stronger patient relationships will be well-positioned to command premium valuations when buyer appetite returns.

But there's also a cautionary tale here. The practices that sell in the next cycle will likely face more sophisticated buyers with higher operational standards. The days of selling a practice based purely on revenue multiples are probably over for good.

The DSO acquisition slowdown isn't just a temporary market correction—it's a fundamental reset that's creating a more sustainable, quality-focused dental services industry. Practice owners who recognize this shift and adapt accordingly will find themselves in a much stronger position, whether they choose to sell or remain independent.

And for those like Dr. Martinez who decide to stay the course? The next few years might prove that the best acquisition offer is sometimes the one you don't take.