Demystifying Private Equity and Orthodontic Practice Acquisition w/ Michael Kruspe
The orthodontic industry is currently only about 10% consolidated, which means that a relatively small percentage of practices are part of organized groups or dental support organizations (DSOs)However, this landscape is evolving rapidly, with more and more practices considering the possibility of private equity-backed partnerships.Unfortunately, there is loads of misinformation and misconceptions that make it hard for people to understand how private equity-backed DSOs work properly.To shed light on this often misunderstood topic, we sat down with Michael Kruspe, Chief Development Officer at Smile Doctors, the largest orthodontic-focused DSO in the U.S.Private equity is a form of financing in the private markets. Unlike venture capital, which typically supports startups and new ideas, private equity focuses on mature businesses.These businesses are already profitable and have established revenue streams. Private equity firms pool resources from private investors to invest in these companies with a track record.One of the intriguing aspects of private equity in orthodontics is the recurring four to five-year timeline. Michael sheds light on why this timeframe is crucial.Private equity firms aim to invest in orthodontic practices, help them grow, and eventually move them to a more capitalized private equity firm. This process typically takes four to five years.Michael predicts that similar to general dentistry, orthodontics will eventually see a higher level of consolidation, potentially reaching 35% or more. This underscores the early-stage nature of the industry's transformation.Whether you're an orthodontist considering private equity or simply curious about the industry's future, this conversation offers valuable insights into the world of private equity in the orthodontic industry and debunks common misconceptions.Let's dive in.Key Takeaways - Intro (00:00)- Meet Michael Kruspe, Chief Development Officer at Smile Doctors OSO (01:34)- What is Private Equity in orthodontics (06:34)- Understanding Private Equity timelines (08:15)- What equity means for doctors in an OSO (12:51)- How an OSO grows (16:12)- Practice valuations and deal structuring (18:12)- Misconceptions and myths around OSO's (25:23)- Joint Venture model in OSOs (29:01)- Is Smile Doctors too big? (37:24)Additional Resources 🔹 Michael Kruspe's email: [email protected] 🔹 Your Voyage to Excellence... Register for the OrthoPreneurs Summit at Sea 2024: https://opsummit2024.com/🔹 For more information, visit: https://orthopreneurs.com/🔹 Join our FREE Facebook group here: https://www.facebook.com/groups/OrthoPreneurs