While attending the recent American Association of Oral Maxillofacial Surgeons (AAOMS) Annual Meeting in Boston, John Hull, Managing Director at The Fortune Group, had the opportunity to discuss and confirm the emerging consensus opinion that M&A activity involving OMS practices is increasing due to changes in the economics of healthcare and the demographics and succession dynamics of OMS physicians. Despite the fact that there weren’t any scheduled sessions or featured programs addressing mergers and acquisitions at the AAOMS meeting, the topic was on the mind of numerous attendees and exhibitors. Mr. Hull heard a range of thoughts on the subject of M&A in the field of OMS from why M&A is gaining traction, to the type of M&A activities most likely to increase, to the impact of M&A on the profession. Here are a few of his insights from the AAOMS meeting.
- Private equity groups (external partners which typically do not include any oral surgeon physicians) have ‘discovered’ OMS and have earmarked a huge amount of capital for investing in and growing OMS groups – over $1 billion by some accounts
- In the past, OMS doctors have not relied on private equity groups or other external partners to assist with oral surgeons’ succession needs or provide capital to finance the growth of their practices, but the advent of the DSO and MSO have created new options for partnering with private equity to succeed in the rapidly-changing dental/healthcare environment
- An increasing understanding of how private equity groups value OMS practices and the benefits of working with external partners to address quality of care, non-clinical operations, and longer-term growth and exit planning issues are causing oral surgeons to contemplate private equity and other external partner options
- Private equity determines the value of an OMS practice based on a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization) that includes a market-based, go-forward salary for surgeons, rather than a multiple of net revenues or billings historically used in the purchase or sale of OMS groups
- OMS practices that are most attractive to private equity groups have three or more oral surgeons, a history of growth, and $1 million or more of EBITDA
- As OMS and private equity partnerships flourish, they are expected to use their scale as a competitive advantage to negotiate higher reimbursement rates (from third-party payors), lower costs (for implants and other supplies and equipment), and increase their spending on marketing efforts (for both referral sources and directly to the consumer)
For more information on how M&A and OMS partnerships with private equity will impact the OMS field, please contact John Hull via email at jhh@fortunegrp.com or on his direct line at 314.881.1188.
