Episode: What Is My Practice Worth When Selling To An OSO Or DSO In 2026? Show: GrowOrtho Podcast,
Host: Luke Infinger, CEO and co-founder, HIP Creative Guest: Brian Christensen, CFA, Chief Development Officer, 7 Pillars Published:

Summary: Selling an orthodontic or dental practice to a DSO or OSO usually takes about six months from signing with an M&A advisor to closing, according to Brian Christensen, CFA, Chief Development Officer at 7 Pillars, and 60 to 90 days of that is due diligence after the letter of intent. Buyers price the practice on adjusted EBITDA, which is revenue minus true go-forward operating expenses minus market-rate doctor pay, and multiples start to climb at roughly $1 million of EBITDA. Christensen estimates a one-doctor practice with $2 million of EBITDA an hour outside Atlanta would trade at about 7.5x to 8.5x, while very high EBITDA concentrated in one provider creates key-person risk that lowers the multiple. Earnouts only count if the targets are achievable, and buyers weigh the last three to six months of performance heavily. In 2026 the DSO market is shifting toward large groups buying smaller groups, sponsor-led platform mergers, and IPOs as alternatives to the traditional private equity recapitalization.

Topics covered: practice sale timeline, M&A advisor engagement letters and success fees, adjusted EBITDA and add-backs, buyer selection and letters of intent, due diligence, exit multiples, earnouts, key-person risk, DSO consolidation, private equity recapitalizations, dental IPOs, the orthodontic M&A market.

Key entities: 7 Pillars, Brian Christensen, Brett Pierce, Christy Ratcliff, Luke Infinger, HIP Creative, GrowOrtho Podcast, US Oral Surgery Management (USOSM), MB2 Dental, Heartland Dental, Foundation Dental Partners, Smile Doctors, myOrthos, Paradigm Oral Health, BlackRock Long Term Private Capital, Warburg Pincus, Thurston Group, SGA Dental Partners, Gen4 Dental Partners, Modis Dental Partners, Tyree & D’Angelo Partners, Park Dental Partners, Blackstone, KKR, Invisalign.

About The Author

Luke Infinger CEO and co-founder, HIP Creative | Host, GrowOrtho Podcast

Luke Infinger leads HIP Creative, a growth partner for orthodontic, dental, oral surgery, and multi-specialty practices, and hosts the GrowOrtho Podcast, where he interviews the advisors, operators, and doctors behind growing orthodontic practices.

Profile: [AUTHOR PROFILE URL]

Featured Expert

Brian Christensen, CFA Chief Development Officer, 7 Pillars

Brian Christensen oversees client development at 7 Pillars, an M&A advisory firm that represents healthcare business owners. He previously worked in M&A at US Oral Surgery Management and as Vice President of Business Development at BOND Orthodontic Partners, and he holds an MBA from Southern Methodist University.

Profile: https://www.7pillarsadvisory.com/our-practice/meet-our-doctors/brian-christensen/

Selling to a DSO or OSO takes about six months once the process starts, according to Brian Christensen, CFA, Chief Development Officer at 7 Pillars, and many practice owners start the conversation later than they should. Christensen has worked both sides of these deals. He did M&A for US Oral Surgery Management, helped a West Coast orthodontic support organization grow from 3 locations to 50 in about two years, and now represents sellers at 7 Pillars, a healthcare M&A advisory firm that completes 20 to 25 DSO and private equity transactions a year.

In this GrowOrtho Podcast episode, Luke Infinger, CEO and co-founder of HIP Creative, asks Christensen to walk through a sale from the first signature to closing. They cover how buyers calculate adjusted EBITDA, which add-backs raise it, what multiples a single-doctor practice can expect, why an earnout can make an $8 million offer look like $10 million, and how the DSO market is moving toward platform mergers and public offerings.

Christensen’s main advice for sellers is to know your numbers the way a buyer will calculate them, and to keep growing after you sign with an advisor, because the last three to six months of performance can move your multiple.

Key Takeaways

• A practice sale run by 7 Pillars typically takes about six months from engagement to closing, with 60 to 90 days of due diligence after the letter of intent; the fastest deal Christensen cited closed in five and a half months.
• Adjusted EBITDA for a practice sale equals revenue, minus true go-forward operating expenses after personal and one-time add-backs, minus market-rate doctor compensation, which most groups set as a percentage of collections.
• Christensen said EBITDA multiples start to rise at about $1 million of EBITDA, and he estimated a one-doctor practice with $2 million of EBITDA an hour outside Atlanta would trade at roughly 7.5x to 8.5x.
• Very high EBITDA produced by a single doctor creates key-person risk, and 7 Pillars has advised owners in that position to add an associate or partner because the higher multiple can outweigh the lower profit.
• An $8 million offer with a $2 million growth bonus is an $8 million offer if the growth target is unrealistic, so sellers should compare cash at closing.
• Buyers start with trailing 12-month EBITDA but weigh the last 3 to 6 months heavily, and an unexplained dip during the process can cost the seller negotiating power or the buyer altogether.
• The deal blockers Christensen sees most often are bringing in a financial advisor or CPA too late and taking advice from too many people outside a small core team.

When Should A Practice Owner Start Talking To An M&A Advisor About Selling To A DSO?

Brian Christensen of 7 Pillars tells practice owners he would rather they start the conversation slightly too early than too late. Waiting too long narrows the pool of dental support organizations (DSOs) and orthodontic support organizations (OSOs) willing to bid, and it lowers the price.

He also separates timing from motive. Christensen’s rule is to never sell out of fear and never sell because a friend did. Start with what you are trying to solve for. When owners say the answer is money, the follow-up is what the money is for, and Christensen points out that if money alone were the goal, more orthodontists would be working Fridays and Saturdays.

An early conversation does not commit anyone to a sale. 7 Pillars regularly talks with owners who only want to understand current deal structures and what buyers are paying for, and some owners go to market just to test their value. Christensen’s view is that when several buyers independently give the same feedback, such as growing new patients, hiring more treatment coordinators (TCs), expanding the footprint, or closing underperforming locations, the feedback is probably right and worth acting on.

How Long Does It Take To Sell A Dental Or Orthodontic Practice To A DSO?

According to Brian Christensen of 7 Pillars, a practice sale usually takes about six months from signing the engagement letter to closing when the seller, advisor, and buyer all move quickly. The fastest deal he cited closed in five and a half months. Roughly 60 to 90 days of that window is due diligence after the letter of intent (LOI) is signed.

Delays come from ordinary life as often as from deal problems. One 7 Pillars client left for a month-long trip to Japan, and the process paused while he was gone. Christensen describes a push and pull: buyers have momentum and their own pipelines, and a seller who stalls risks losing that momentum.

Longer timelines happen. Christensen described a non-dental operating business that engaged 7 Pillars in December 2024, went to market in spring 2025, accepted an LOI in July 2025, and was still expected to close at the end of 2026, close to two years in total. He also described a general dentist (GP) who signed with 7 Pillars in 2024, found a dental support organization (DSO) he liked, and then spent another year fixing staff turnover and growing cash flow and EBITDA before closing with MB2 Dental. Waiting the extra year let him close with the group he had wanted from the start.

What Does An M&A Advisor’s Engagement Letter Cover, And What Is A Tail?

An engagement letter is the contract a practice owner signs with an M&A advisor before any analysis begins. Brian Christensen of 7 Pillars describes it as a long document that sets out the advisor’s responsibilities, the seller’s responsibilities, and the economic arrangement.

At 7 Pillars, the economics are usually a success fee, meaning a percentage of the transaction paid only if the deal closes. The firm typically charges no retainer or upfront fee. Christensen’s reasoning is that when the seller gets paid, the advisor gets paid, and if the process ends without a deal, both sides lose only time.

A tail is the clause that protects the advisor if the seller walks away. Under 7 Pillars’ usual terms, Christensen said, a seller who terminates the engagement or decides not to transact cannot pursue a deal with any buyer 7 Pillars talked to on the seller’s behalf for about one year. He noted that other advisors use breakup fees or longer tails, so sellers should compare those terms before signing.

How Is Adjusted EBITDA Calculated When You Sell A Dental Practice?

EBITDA (earnings before interest, taxes, depreciation, and amortization) is the cash-flow number that dental support organizations (DSOs) and orthodontic support organizations (OSOs) use to price a practice. Brian Christensen’s working formula for a practice sale is revenue, minus the true go-forward operating expenses of the business, minus market-rate compensation for the doctor.

The go-forward adjustment is where add-backs come in. Add-backs are expenses on the current books that a buyer will not carry after closing, so they get added back to profit. Christensen splits them into two groups.

Personal add-backs include pay for a spouse or children who do not actually work in the practice, a boat, a country club membership, sports tickets (he has seen 49ers tickets on the books), a personal car, home renovations, and the share of online orders that went to the house instead of the office.

One-time add-backs include a $30,000 carpet replacement, two software tools that do the same job, a stretch of paying two marketing vendors during a switch, an employee who left and will not be replaced, and a large one-time technology purchase.

Adding both groups back produces what Christensen calls normalized adjusted EBITDA. The last step is subtracting doctor pay. Many owners quote an EBITDA figure that includes nothing for their own clinical work. In Christensen’s example, a doctor who reports $2 million of EBITDA with no salary built in is really describing what that doctor takes home before taxes, and a buyer has to pay someone to treat patients the next morning. Most groups pay doctors a percentage of collections or production. A few orthodontic groups use a day rate or flat salary, though Christensen said most are moving to a percentage of collections, and groups buying general dentistry, pediatric dentistry, endodontic, periodontic, and oral and maxillofacial surgery (OMS) practices pay a percentage of collections.

7 Pillars runs its own EBITDA calculation before going to market, separate from the buyer’s underwriting. Without that number, Christensen said, he could not tell whether a $10 million offer was excellent or poor. Luke Infinger added that this is how an advisor can spot a seller who is happy with an offer but leaving $3 million to $4 million on the table.

What Do DSO And OSO Buyers Look For Beyond EBITDA?

Buyers want to know what they are purchasing today and what they can do with it after closing. During the analysis phase, 7 Pillars collects practice financials, payroll data, and operational data, including how many operatories the practice has and whether the chairs or the building have room to grow.

Brian Christensen’s current example is a general dentistry practice with 10 operatories and room to add 5 more. That expansion capacity changes how a dental support organization (DSO) models the deal. Buyers test for four kinds of constraints: space, doctors, geography, and payers. A buyer that cannot take a practice from its current value to something higher has no reason to buy it.

Christensen said that when 7 Pillars takes an orthodontic practice to around 10 DSOs and orthodontic support organizations (OSOs), many buyers call back asking for the story: why the doctor is really selling and what the growth path looks like. That information does not appear in the financials, so the advisor has to gather it and present it alongside the numbers.

How Does The Buyer Process Work From The First Meeting To A Letter Of Intent?

After the seller reviews the adjusted EBITDA figure and decides to proceed, 7 Pillars matches the seller with buyers based on what the seller wants from a partner, which is rarely only price. Brian Christensen listed common preferences: a growth partner, a joint venture (JV) model in which the buyer takes a majority stake but not 100%, an early-stage dental support organization (DSO) with equity upside, or a late-stage group that is steady and stable.

He estimates there are around 300 DSOs in the U.S., and 7 Pillars feels very confident in about 30 of them. Not all 30 buy every specialty in every state; some only want orthodontists, and a GP in Florida or an oral surgeon in Washington will have a shorter list. 7 Pillars introduces each client to a handful of groups and always includes one wild card, because a weak pitch makes the strong ones easier to recognize.

The sequence Christensen described:

1. Virtual introductory meetings of about 45 minutes, which he calls a virtual coffee.
2. A call for initial offers, which are not best and final. In one example, a doctor met 8 groups and 5 submitted term sheets.
3. Before showing any numbers, the advisor asks the doctor which groups they liked, because seeing the offers changes how people remember the meetings.
4. The list narrows to 2 or 3 groups for in-person visits, typically an after-hours tour of the practice followed by dinner.
5. A call for best and final offers, then negotiation on value and structure, usually with the seller’s preferred group.
6. Signing the letter of intent (LOI), which Christensen compares to getting engaged and planning the wedding.

Personal fit carries weight because many selling doctors sign 5-year employment agreements. Christensen advises getting someone from the buyer’s side to the in-person dinner who is not on the M&A team, such as the CEO, CFO, COO, chief clinical officer, or a doctor who has already partnered with the group, since the M&A contact moves on to the next deal after closing.

What Happens During Due Diligence After Signing A Letter Of Intent?

Due diligence is the 60 to 90 day verification period between signing the letter of intent (LOI) and closing. Brian Christensen of 7 Pillars calls it the hardest stretch for doctors, because they are still running a practice, seeing patients, and managing family life while answering questions such as why an employee was terminated three years ago.

He described three main diligence streams.

Quality of earnings (QoE): The buyer hires a third-party accounting firm to verify the numbers. Most buyers hope it confirms the figures, but sellers should expect pushback and requests for explanation.

Legal: The deal involves hundreds of pages of documents. Christensen recommends an attorney who specializes in dental or healthcare M&A and understands corporate practice of dentistry rules, because a generalist has to learn those on the seller’s time and slows the deal. 7 Pillars introduces clients to preferred attorneys at the LOI stage.

Operational: The buyer prepares to integrate the practice, covering HR, technology, compliance, and systems such as the practice management software (PMS). For the buyer, closing day is when the integration work begins.

Should You Keep Growing Your Practice While It Is On The Market?

Yes, according to Brian Christensen of 7 Pillars, because recent trends carry heavy weight in valuation. Buyers start with trailing 12-month (TTM) EBITDA, but they increasingly look at the last 3 and 6 months as a better predictor of the next 3 to 6. Christensen tells clients to push harder once they engage, because many sellers do the opposite and ease off.

The effect runs both ways. When Luke Infinger asked whether strong in-process growth could move a deal from a 5x multiple to 6x or 8x, Christensen agreed. An unexplained dip has the opposite effect: the seller loses negotiating power, and some buyers drop out entirely.

Christensen attached two cautions. Buyers will judge whether growth is sustainable or a short spike. And extra hours that cannot continue after closing, such as suddenly working Saturdays and Sundays, set an expectation the doctor will be held to. He said a practice is usually worth the most when it sits in the middle of a growth trajectory, rather than at the start of one or at the peak.

Are Earnouts And Growth Bonuses In A DSO Offer Worth Counting?

Earnouts, also called growth bonuses, are payments a buyer promises after closing if the practice hits future targets. Brian Christensen of 7 Pillars supports them when they fit the deal and says they often do not.

His test is whether the target is achievable, and usually only the selling doctor knows. In his example, a buyer values a practice at $8 million today and offers another $2 million in a year if the practice reaches certain numbers. The buyer presents that as a $10 million offer. If the $2 million target is out of reach, the seller received an $8 million offer, which Christensen said may still be a good deal.

He said some dental support organizations (DSOs) stack aggressive incentives on top of the closing price so a seller can announce a 15x headline multiple when the cash at close reflects 8x. When comparing offers, weigh what is paid at closing and discount any contingent amount the practice is unlikely to earn.

What EBITDA Multiple Can A Dental Or Orthodontic Practice Get In 2026?

Brian Christensen of 7 Pillars said multiples start to rise at roughly $1 million of EBITDA. There is also a ceiling, and it depends on how many providers produce that EBITDA.

A single doctor in a hard-to-recruit market producing $5 million of EBITDA has an excellent business for that owner, but buyers see key-person risk (often called key man risk): the profit depends on one person who may slow down after receiving a check. Those deals tend to get a low multiple and heavy structure. 7 Pillars has advised owners in that position to hire an associate or bring in a partner, accepting lower profit in exchange for a higher multiple. Christensen’s general rule is to build a practice that would keep running if the owner left for a month.

He gave two reference points. A one-doctor practice about an hour outside Atlanta with $2 million of EBITDA would likely trade at about 7.5x to 8.5x EBITDA, which is already close to the point where key-person risk becomes a concern. A Southeast client with $3 million of EBITDA and one doctor worried buyers; with an associate in place at the same EBITDA, Christensen said that practice would draw strong interest and about 8x would be fair.

If the associate is central to the practice, the associate may need a share of the deal. Christensen said that can take the form of a transaction bonus, equity in the acquiring dental support organization (DSO) or orthodontic support organization (OSO), a joint venture stake or share of future practice profits, or a cash signing bonus, depending on what the associate, buyer, and owner negotiate.

What Are The Most Common Reasons A Dental Practice Sale Stalls?

Beyond key-person risk, Brian Christensen named two blockers he sees repeatedly across the 20 to 25 dental support organization (DSO) and private equity deals 7 Pillars completes each year.

The first is bringing in a financial advisor or CPA too late. An M&A advisor does not know the seller’s savings, investments, spending habits, or family obligations, and those details decide which deal structure fits. A doctor with children headed to expensive universities, a doctor who needs the ongoing cash flow of a joint venture (JV) model, and a doctor already holding a large position in a single stock who wants a steady buyer each need a different deal. 7 Pillars prefers to work alongside the client’s financial advisor for that reason.

The second is too many opinions. Christensen told a story about a client who insisted the team consult a friend in private equity; the friend turned out to sell representations and warranties insurance to private equity-backed companies. His recommended core team is the seller’s spouse, a trusted practice manager, an M&A advisor, a CPA or financial advisor with tax expertise, and eventually a transaction attorney. Anyone outside that group, he said, adds noise.

What Is Happening In The DSO Market In 2026?

Brian Christensen of 7 Pillars described the current phase of dental consolidation as consolidators buying consolidators. Four or five years ago, when debt was cheap, the roughly 300 dental support organizations (DSOs) in the U.S. were buying individual practices. Now large DSOs are buying smaller and emerging DSOs with 20 to 40 practices that fill a geographic gap or strategic need, and 7 Pillars has represented several of those sellers.

Recent deals fit that pattern. Heartland Dental closed its acquisition of Foundation Dental Partners, a 33-practice group in Georgia, Tennessee, South Carolina, and Kentucky, on October 2, 2026, according to Heartland’s announcement. Smile Doctors acquired myOrthos, an orthodontic support organization with more than 70 locations in 13 states, in March 2025, according to Smile Doctors’ press release.

Christensen also explained why private equity is looking for new exit routes. A recapitalization, or recap, is when the private equity firm that owns a DSO sells its stake to another investor. The usual path runs from a lower middle market firm (he put that segment at businesses with $5 million to $30 million of EBITDA) to a mid-market firm to one of the largest firms, such as BlackRock, Blackstone, or KKR. Recaps have slowed since 2021 and 2022 because the cost of capital has risen and these deals depend on debt.

He pointed to two alternatives taking shape.

Ownership buybacks: In July 2026, Paradigm Oral Health announced a surgeon-led buyback of BlackRock Long Term Private Capital’s stake, backed by an investor group led by Warburg Pincus with Goldman Sachs Alternatives and Sixth Street, according to the company’s announcement. Christensen estimated Paradigm’s value at $3 billion to $4 billion and expects it to become a test case for other forms of liquidity, such as annual distributions.

Mergers aimed at an IPO: In June 2026, Thurston Group combined SGA Dental Partners, Gen4 Dental Partners, and Modis Dental Partners under the SGA Dental Partners name, creating a platform with more than 250 locations and more than 500 dentists across 26 states, according to Becker’s Dental Review. Christensen said Tyree & D’Angelo Partners has also merged three of its general dentistry groups. His read is that sponsors are building enough scale to go public instead of passing a company through a third or fourth private equity owner. Park Dental Partners, a Minnesota-based group, priced its Nasdaq IPO at $13 per share in December 2025 under the ticker PARK, and Christensen said the shares were trading around $20 at the time of recording.

What Is The Orthodontic M&A Market Like Right Now?

Luke Infinger and Brian Christensen both described the orthodontic market as uneven. Infinger said figures he has seen online show orthodontics growing about 3.5%, but he considers the market flat or slightly down once rising costs are counted: higher team pay, more expensive supplies, and higher build-out and lease costs for new satellite offices.

Infinger sees fewer orthodontic transactions and more joint venture (JV) structures from reputable orthodontic support organizations (OSOs). He prefers JVs because the doctor keeps a meaningful stake, sometimes 40% of the practice. In 2021 and 2022, he said, he often talked to founding doctors who had sold outright, dropped to one clinical day a week, and watched growth stall. Christensen agreed that JVs align incentives. He described 2021 and part of 2022 as banner years when many OSO acquisitions happened, and said the market now looks like a normal steady state.

Results vary sharply by location and patient mix. Infinger said two practices with the same offer and the same marketing can diverge, with one growing fast and the other flat or down 1% to 2%. Some HIP Creative clients see 500% to 600% returns on combined agency fees and ad spend and are still flat; Infinger’s point was that without that marketing, those practices might be down 10%.

Christensen added that practices with more adult patients feel a slowdown first, because adults postpone Invisalign while parents keep prioritizing treatment for their kids. Infinger noted that general dentists offering clear aligners, sometimes at half the cost, are now orthodontists’ biggest competitor in that category.

Looking ahead, Christensen doubts pure-play OSOs will exist in five years. He expects more multi-specialty groups combining pediatric dentistry and orthodontics, sometimes with oral surgery, either through new platforms or through orthodontic groups acquiring pediatric practices.

Frequently Asked Questions

How Long Does It Take To Sell An Orthodontic Practice To A DSO Or OSO?

About six months from signing with an M&A advisor to closing when everyone moves quickly, according to Brian Christensen of 7 Pillars. The fastest deal he cited took five and a half months. Roughly 60 to 90 days of the process is due diligence after the letter of intent.

Do M&A Advisors Charge An Upfront Fee To Sell A Dental Practice?

It depends on the firm. 7 Pillars usually charges no retainer and is paid a success fee, a percentage of the transaction, only if the deal closes. Its engagement letters typically include a one-year tail that prevents the seller from dealing with buyers the firm contacted on their behalf for a year after terminating.

What Are Add-Backs In A Dental Practice Valuation?

Add-backs are expenses on the current books that a buyer will not continue after closing. They include personal costs run through the practice, such as a salary for a spouse who does not work there, a boat, or a car, and one-time costs, such as a $30,000 carpet replacement or overlapping software. Adding them back raises adjusted EBITDA.

Does Depending On One Doctor Lower A Practice’s Valuation?

It can. Brian Christensen said multiples start to rise around $1 million of EBITDA, but a single provider producing very high EBITDA creates key-person risk, which leads buyers to offer lower multiples with more structure. Adding an associate can raise the multiple even if profit dips.

Should I Sell My Practice While It Is Growing Quickly?

Christensen’s view is that a practice is usually worth the most in the middle of a growth trajectory. Buyers weigh the last 3 to 6 months heavily, so strong, sustainable recent growth can support a higher exit multiple, while an unexplained dip can cost the seller negotiating power.

Will Pure-Play Orthodontic Support Organizations Still Exist In Five Years?

Christensen doubts it. He expects orthodontic support organizations (OSOs) to move into multi-specialty groups, especially combinations of pediatric dentistry and orthodontics, sometimes with oral surgery.

Glossary

DSO (dental support organization): A company that provides business and administrative support to affiliated dental practices, often backed by private equity.

OSO (orthodontic support organization): A DSO focused on orthodontic practices.

EBITDA: Earnings before interest, taxes, depreciation, and amortization; the cash-flow measure buyers use to value a practice.

Adjusted EBITDA: EBITDA after add-backs for personal and one-time expenses and after subtracting market-rate doctor compensation.

Add-back: An expense on the current books that a buyer will not carry forward, added back to profit when calculating adjusted EBITDA.

Trailing 12 months (TTM): Financial performance over the most recent 12 months.

Multiple: The number by which a buyer multiplies EBITDA to set the purchase price (for example, 8x).

Success fee: An advisor fee paid as a percentage of the transaction, only if the deal closes.

Tail: An engagement-letter clause that bars the seller from transacting with buyers the advisor contacted for a set period after terminating the engagement.

Letter of intent (LOI): A preliminary agreement on deal terms that starts formal due diligence.

Quality of earnings (QoE): A third-party accounting review, commissioned by the buyer, that verifies the seller’s financial figures.

Earnout or growth bonus: A payment promised after closing if the practice reaches future performance targets.

Joint venture (JV) model: A structure in which the buyer acquires a majority of the practice and the doctor keeps a minority ownership stake.

Recapitalization (recap): A transaction in which the private equity owner of a DSO sells its stake to another investor.

Key-person risk: The risk that a practice’s profit depends on a single individual, often called key man risk in dental M&A.

Corporate practice of dentistry: State rules that limit non-dentist ownership or control of dental practices.

PMS (practice management software): The scheduling, billing, and records system a practice runs on.

Full Episode Transcript

[00:00:07] Brian’s Background And Path To The Sell Side

Luke Infinger: All right, we are here with Brian from 7 Pillars. Super excited to have you on the show today.

Brian Christensen: Thanks for having me. Happy to be here.

Luke Infinger: Absolutely. Tell us a little bit about you. What’s your background? How did you get into this space?

Brian Christensen: Sometimes I ask myself that every day. I left business school at SMU and joined a small investment bank, which is just a fancy place that sells businesses, more or less. We started doing some consulting for private equity firms that were starting to get into the DSO space, so we did some consulting for MB2 and some other multi-site healthcare groups: veterinary, dermatology, et cetera. As I was considering my next step, I thought, man, that would be interesting. I saw how fast-paced it was. MB2 was doing 60, 70 acquisitions per year.

So a job opening came open at US Oral Surgery Management, which was the first OMS-only group in the United States. I joined at a perfect time. It was right after COVID, and everyone was scared. They didn’t want to go through something like that alone. I joined an amazing team there with great leadership. Rick Hall, who was the CEO, is now chairman of the board. He gave me a chance, and I lucked into an amazing spot. I helped do M&A there for around 15 months and went through one of these things called a recap event, which are tough to come by these days. I helped with some of that recap process, and for a young guy it was an incredible experience to see a $700 million-plus valuation company and get to play a role in that transaction.

Luke Infinger: How old were you then?

Brian Christensen: I was 28. So having a seat at the table there was super cool and great for experience. The transaction went through, and it was very successful for all the shareholders, including the partner doctors. I had an opportunity to stay on and take on an elevated role. At the time, I was young and naive, and I thought, well, this is easy. Anyone can build a business, scale it, deal with doctors every day, get them all rowing in the same direction.

So I joined a startup. It was an OSO, an ortho-only group on the West Coast, and I was going to lead their M&A engine at 29 years old. They had 3 practices, and they said, hey, we want you to go scale it. I thought it was a good idea at the time, and it was an incredible experience. I helped scale it from 3 locations to 50 in around 2 years.

Luke Infinger: That’s a lot.

Brian Christensen: It’s a lot. It was a lot of travel to California and Utah and Washington and Oregon. At the same time, on the personal side, my dad is a small business owner with a small accounting firm in Waco, Texas. He was going through a transition as well. He was getting a lot of inbound emails, a lot of inbound calls, and he was getting offers. I felt a shift happen where I wanted to help guys like my dad, because I knew that if my dad’s transition went poorly, it would not bode well for my parents long-term.

My dad has one chance to do this, but I’m an M&A guy doing 15, 20 transactions per year. One goes bad, you go on to the next. My dad only has one chance. So I started seeing things from that perspective, because ultimately, as a buyer, Luke, my job, and it’s just business, is to buy the best businesses for as cheap as possible. There’s nothing wrong with that. It’s the same as buying a home. You want to buy the best home for as cheap as possible. But as a seller, you want to maximize that value. So I felt like I should go represent sellers.

The hard part is that, and you know this space well, there are a lot of bad actors in dental on both sides, very pro-DSO or OSO and very anti-DSO or OSO. I wanted to join a firm I was proud to say I worked for, with good people who represented clients the right way. I had done a few transactions with 7 Pillars, and I always felt that as a buyer I got a fair shake, and that they put the client’s needs above all else. I’ve been at 7 Pillars for 2 and a half years now, and it’s been awesome.

Luke Infinger: What year did you come on board with 7 Pillars?

Brian Christensen: 2024.

Luke Infinger: When you started with 7 Pillars, who were you working with?

Brian Christensen: A lot of Brett Pierce, who’s our founding partner, and Christy Ratcliff, who’s a managing partner.

Luke Infinger: And what’s your role at 7 Pillars now?

Brian Christensen: Chief Development Officer.

Luke Infinger: So are you the face and leading the day-to-day at 7 Pillars, or what does the team look like?

Brian Christensen: If this is the face of 7 Pillars, we’re all in trouble. My role is to oversee client development: bringing in new business, and once business is in the door, making sure it’s taken care of properly. My role is to grow the client base.

[00:06:18] What 7 Pillars Does

Luke Infinger: Some people listening and watching may be asking, okay, what is 7 Pillars exactly? How would you define it?

Brian Christensen: 7 Pillars is an M&A advisor that specifically represents healthcare business owners. Historically, Luke, we represented dentists only, so dentists and dental specialists. Recently we’ve taken our knowledge, a lot of what I built in my prior life in investment banking, and said, well, if I can help an orthodontist or a dentist or a pediatric dentist, why can’t I help a plastic surgeon or an optometrist?

Luke Infinger: Makes sense.

Brian Christensen: Or even further, because we know dental pretty well, why couldn’t we represent a business that caters to those clients, like an orthodontic marketing business or a dental IT business? Because of our knowledge of dental, we feel pretty comfortable representing those types of businesses as well.

Luke Infinger: Interesting. Give us an idea of the size of 7 Pillars, the team makeup, and how many deals you’re looking at a year.

Brian Christensen: The team is around 12 to 15 people. There’s what we’d call the deal-facing team, which is 3 or 4 of us, and that’s the quarterback of the transaction. Then we have a back office team that does all the financials and all the underwriting. Then we have some leadership and some administrative and support functions. So it’s around 15 people. On the number of transactions, Luke, we’ll probably do 20 to 25 per year on what you’d call the DSO private equity side of things.

[00:08:27] When To Start The Conversation

Luke Infinger: Got it. So when somebody is thinking about transitioning, or wondering what they’re going to do, maybe they figure they’ve got another 5 years, I’d think you start talking to people too late in a lot of cases, right? From what I’ve seen, if you’re thinking about it at all, go ahead and have a conversation, because it could take a lot longer than you think to sell your business. This isn’t 2021 or 2022. The market’s a little different. So ideally, when do you want to talk to someone?

Brian Christensen: There’s a lot to unpack there. One, I would never pursue a transaction out of fear, and I’d never pursue a transaction or partnership because your buddy did it. I’d do it because you’re trying to solve for something, and an eventual transition is okay to solve for. But everyone has their why, so first you need to understand what your why is. Now, Luke, we’ve talked about this, and everyone says, well, it’s money. Yes and no.

Luke Infinger: For what?

Brian Christensen: Right, for what? And if money were that important, you’d probably be working Fridays and Saturdays too, and there probably aren’t many orthodontists working those days.

Luke Infinger: That’s true. Although Saturday’s a great day to be open.

Brian Christensen: It is a great day.

Luke Infinger: Get an associate to work it. We’ll come back to that.

Brian Christensen: But I agree completely, Luke. Sometimes people wait too long. It’s okay to have a discussion with us and get educated on what’s going on in the market: what deal structures are out there, what buyers are looking for. We always have those conversations. Or you might even go to market to test what your business is worth or see if you like anyone. The best advice I always give is I’d much rather you do it slightly too early than too late. Too many times people wait too long, and it affects their options from a buyer cohort, and it also affects their value.

Luke Infinger: Because you don’t have to sell.

Brian Christensen: You don’t have to sell.

Luke Infinger: Like you said, you could go to market and see, and maybe potential buyers tell you what to fix inside your business to be worth even more.

Brian Christensen: Look, if you go to market and you start getting feedback from several groups and they’re all saying the same thing, it’s probably true. And that’s okay. Maybe it’s, hey, you need to grow new patients. Maybe it’s, hey, you need to hire more TCs. You need to expand your footprint. You need to shut down a few locations because you have too many. All of that is fantastic feedback, and if everyone’s saying it, it’s probably true and you should listen.

[00:11:30] How Long A Sale Can Take

Luke Infinger: What’s the longest you’ve worked with a business before it actually transacted?

Brian Christensen: I’ll give you the truthful answer.

Luke Infinger: Don’t lie to me.

Brian Christensen: Never lie. We had a client engage us in December of 2024. It’s not a dental practice; it’s an operating business. It went to market that spring, spring of ’25, and got under letter of intent, or accepted a formal offer, in July of 2025. It’s still under LOI as of today, and it’s going to close, fingers crossed, at the end of the year. So that’s been a 2-year process. That’s not normal, but things happen. Things come up through the process. Life happens. Things pop up in diligence where you have to go tweak something or there has to be a fix.

We also just had a GP that was interesting. He signed up with us in 2024, went to market, and liked one specific group. They liked him, but he had some things to sort out in his practice. He had a lot of turnover. He also had a lot of growth embedded in his business, and he felt his value should be higher. Luke, you probably talk to guys like this all the time. It’s like, okay, if you really think you have growth, go do it. Well, he went and did it, and he closed with MB2 earlier this month, which is fantastic. He waited a little longer, got his personal cash flow up a little, got his EBITDA up a little, waited one more year to get personally ready, and then partnered with a group he always wanted to partner with. That’s a win. We helped him through that process: here’s the feedback we’re getting, here are some tweaks you can make that will probably impact value.

Luke Infinger: I thought you were going to say longer. Really, 2 years? It can go by so fast, especially if there’s a clear path to what you need to fix in the business and a light at the end of the tunnel. Hey, if we do these things, you can get another point, or whatever that is.

Brian Christensen: I agree completely. They have to be coachable and willing to take the advice. A lot of times people say, well, I could grow so much, I could do this. And look, I used to be on the buy side, and you know what I’d say? Well, why haven’t you done it?

Luke Infinger: It goes back to your why. If you’re not doing it from a place of fear, logically you’d want to fix those things so you can get the most juice from the squeeze.

[00:14:39] Engagement Letters, Success Fees, And Tails

Luke Infinger: We’ve thrown out buzzwords like EBITDA and diligence, and you brought up letter of intent. Explain what those mean, and let’s walk through the timeline of a transaction.

Brian Christensen: Say you engage us today. We’re going to start requesting a lot of information, because we’re trying to determine your profitability, which is EBITDA.

Luke Infinger: What do you call that stage when you start collecting info?

Brian Christensen: We call it analysis. We collect that information and try to understand the puts and takes of your business.

Luke Infinger: If I’m a dental office, have I signed anything while you’re collecting this info?

Brian Christensen: You’ve signed an engagement letter.

Luke Infinger: What does an engagement letter look like? Different groups can do them differently. What’s a tail? What fee is standard in the industry?

Brian Christensen: They sign an engagement letter with us, and that’s a long Word document, thank you to the attorneys, that outlines our responsibilities as an advisor, their responsibilities as a seller or client, and our economic arrangement. Usually, Luke, we don’t charge a retainer or an upfront cost. We believe strongly that if you go through the process and end up partnering with someone, you get paid, we get paid. If you don’t get paid, we don’t get anything. I feel like that’s fair. If you go through the whole process and don’t do anything, then it’s lost time, but it’s lost time for us and for you. So the engagement letter outlines the economic arrangement. Usually it’s a success fee.

Luke Infinger: Success fee. Okay.

Brian Christensen: It’s a percentage of the transaction. A tail, essentially, Luke, works like this: you engage us, and we’re your exclusive M&A advisor.

Luke Infinger: You’re going to do all the work, the accounting, the analysis.

Brian Christensen: We’re going to do all the work, all the diligence. We’re going to talk to all the buyers and negotiate on your behalf.

Luke Infinger: Market them.

Brian Christensen: No doubt. If you decide not to pursue a transaction, or you terminate the engagement, we have, I think it’s usually a year. Anyone we’ve talked to on your behalf, you can’t pursue a partnership or relationship with them for a year. It’s mostly there to protect us, and it’s very standard. Some people have breakup fees, some people have longer tails. We just say, don’t go do anything for a year.

Luke Infinger: That’s very simple.

Brian Christensen: Very simple. So they sign an engagement letter.

[00:17:18] Analysis And The Story Of The Business

Luke Infinger: Then you do analysis.

Brian Christensen: Then we do the analysis. We’re collecting a lot of information: practice financials, payroll data, operational data. We’re trying to understand your business. How many operatories or chairs do you have? Is there room for growth in those operatories, or can you expand? All of that helps us position the business to maximize value.

Luke Infinger: Because like anything, you want to put together a story that’s factual. But stories sell. So what’s the story of the business?

Brian Christensen: Right now we have a 10-operatory GP who has the ability to expand another 5 operatories. That helps paint a picture, because buyers, Luke, want to understand what they’re buying historically, but also what they can go do with it. Do I have space constraints? Doctor constraints? Geographical constraints? Payer constraints? They’re trying to understand their upside and their opportunity, because if they can’t buy a business at X and take it to Y and make it better, they’re dead in the water. So it’s not just about EBITDA, and we’ll get to that. It’s also, what can we go do with it?

We do all this analysis to understand the story of the business so we can position it properly. Luke, when we represent an orthodontist and take it to 10 DSOs, OSOs, whatever you want to call them, I can’t tell you how many calls we get saying, this is all great, but what’s the story? Why is this doctor really pursuing it? What can I go do with the business? None of that is on paper. We gather that information, put it together, and determine what we deem profitability, or EBITDA, to be. That’s the cash flow of the business on a go-forward basis.

[00:19:12] Adjusted EBITDA And Add-Backs

Luke Infinger: Let’s talk about that, because I don’t think a lot of people understand what adjusted EBITDA is. Doctors tell me, hey, it’s going to take me another 5 or 10 years because I need to get to X EBITDA. And I say, well, what’s your adjusted EBITDA? And they don’t know what that is.

Brian Christensen: There’s a lot to unpack with adjusted EBITDA. Let’s start with revenue. Everyone, for the most part, agrees on what revenue is. Then we need to understand the true go-forward operating expenses of the business. If you sold or partnered with a DSO, they’re probably not paying your spouse unless your spouse actually works in the business, and probably not paying your kids unless they work in the business.

Luke Infinger: Not paying for your boat.

Brian Christensen: Not paying for your boat or your country club membership or tickets to the 49ers. I’ve had that happen.

Luke Infinger: Owner draws.

Brian Christensen: Owner draws. It doesn’t include your car. It doesn’t include home renovations. It doesn’t include all the Amazon orders that are probably 50% for the office and 50% for your house.

Luke Infinger: Date night.

Brian Christensen: Date night. All those things.

Luke Infinger: And that can be massive. Once you do all those, what are called add-backs, it could be substantial.

Brian Christensen: You add that back because a buyer isn’t going to let it continue going forward. The other thing, Luke, is one-time costs. Did you just replace the carpet for $30,000? You’re probably not going to do that every year.

Luke Infinger: Do you have 2 softwares that do the same thing?

Brian Christensen: Right. Do you have 2 marketing vendors where you’re offloading one and onboarding another, and there’s crossover? Did you fire an employee who isn’t going to be replaced? All of those should be added back because they’re not normal. If you just bought a big piece of technology, or you had other one-time expenses, those need to be added back. All of those add-backs, both personal and one-time, get you to what I call normalized adjusted EBITDA.

But there’s one more thing. Hey, Dr. Smith, you’re not going to work for free. A lot of people say, well, my EBITDA is $2 million. Okay, have you baked a salary in there? Well, no. So that $2 million, Dr. Smith, is what you’re really taking home before taxes. Someone is going to have to pay you to come to work tomorrow.

Luke Infinger: So then you have to look at the industry average salary.

Brian Christensen: Yes. Most groups pay a percentage of collections or production. A few orthodontic groups pay a day rate or a flat salary, but most are moving toward a percentage of collections. And if you’re not an orthodontist, whether you’re a GP, pedo, endo, perio, or OMS, they all pay a percentage of collections. It’s an eat-what-you-kill revenue share model. After that is subtracted, you have EBITDA. So it’s your revenue, less your true go-forward operating expenses, less your doctor compensation. That equals EBITDA, the cash flow of the business that they’re buying. Make sense?

Luke Infinger: Makes sense.

Brian Christensen: We do our own EBITDA calculation, because if a doctor gets a $10 million offer, I don’t otherwise know if that’s really good or really bad. The DSOs or OSOs are always going to do their own diligence and their own underwriting as well. But we do it too, because if you get a $10 million offer, I don’t know if that’s the best offer in the world or a terrible one.

Luke Infinger: Right. The doctor could be happy, and you could say, hey, you’re leaving $3 or $4 million on the table. That’s where you act like a fiduciary: we’re going to get the most you can get. I can’t imagine doing a deal like this alone. Do dentists try to do this on their own?

Brian Christensen: They do.

Luke Infinger: We’ll come back to that. Let’s keep going with the timeline.

[00:23:27] Meeting Buyers And Initial Offers

Brian Christensen: Once we calculate that EBITDA, we show it to our clients. Was this about what you expected? Some say, yeah, it’s about what I expected; I have a really good accountant who’s helped me through this. Other times they have no idea. They think their EBITDA is way up here, and it’s actually way down here. So it’s a good pulse check. Are you good? Do you want to continue? Sometimes people say, man, that’s not what I expected. I’m not sure I’m going to get what I thought. Okay, let’s talk about that. What can we do to grow? Are there low-hanging fruit items we can take care of? But let’s assume they want to move forward. Then we introduce them to prospective partners or buyers.

Luke Infinger: How do you do that?

Brian Christensen: It starts with understanding what the client needs and wants out of a partner. Everyone goes to financial, but it’s always more than that. I want a growth partner. I want a joint venture model, where someone buys…

Luke Infinger: Very popular right now.

Brian Christensen: …where someone buys a majority percentage of your business, but not all of it. I want an early-stage company because I want some upside in their equity. I want a late-stage company that’s very steady and stable. Okay, now that we know that, we try to match you with a handful of groups that fit. We don’t run processes where we introduce our clients to 30 possible buyers.

Luke Infinger: Because that’s overwhelming.

Brian Christensen: It’s overwhelming.

Luke Infinger: It’s a lot of meetings, and some of these people want to meet in person.

Brian Christensen: If you talk to 10 DSOs or 10 OSOs, they’re all going to tell you they do things differently, that they have real clinical autonomy, and that they look at a lot of deals and only choose the best of the best. It sounds very compelling, but if you hear 7 of those in a row, it’s like, what was the difference? Your eyes start glazing over. So we introduce them to a handful of groups we think could be a good fit. Fun fact: we always introduce a wild card, just to see how they react. Sometimes it makes the other groups look better. You don’t know how good all the groups are until you talk to a bad one.

Luke Infinger: You have to know what’s out there. If you’re hearing the same pitch and maybe you’re not really happy, and then you talk to the wild card and their offer is significantly lower, you go, oh, that first one was actually a really good offer and meeting.

Brian Christensen: Yeah. There are 300 DSOs out there, and they’re not all created equal.

Luke Infinger: 300?

Brian Christensen: Too many. We should start a DSO. What’s one more? But of those 300, there are probably only 30 we feel very confident about. And if you’re a GP in Florida, not all 30 buy GPs in Florida. If you’re an oral surgeon in Washington, not all 30 buy oral surgeons.

Luke Infinger: The laws are different in each state.

Brian Christensen: That, and some groups don’t want an oral surgeon. They only want orthodontists. So we introduce them to a handful of groups. These are virtual, get-to-know-you meetings. I call it a virtual let’s-have-a-coffee. It’s 45 minutes; you tell your story, they tell theirs, and we’ll have a handful of those. Then we call for initial offers. These aren’t best and final, but they’re a good step in the right direction. It’s like an initial offer on a home. Is your initial offer the best you can do? Probably not. You just hope it gets you to the dance.

So we’ll say, hey, Dr. Smith, we talked to 8 groups, and 5 of them offered you an initial term sheet. Before I show you any offers, who did you like? Once you start seeing money, you start changing the way you think about groups. So, who did you like?

Luke Infinger: The worst meeting becomes the best. Well, actually, Ronnie was pretty cool.

Brian Christensen: Right. Well, actually, I hated everything Ronnie said, but I guess they’re okay. So we want to understand who you liked, because that matters.

Luke Infinger: You’re going to be working with those people to some degree, depending on the size and scale.

Brian Christensen: And 5 years is a long time to be miserable. A lot of these doctors sign up for a 5-year employment agreement. You’re going to forget about the big check at the end. So who do you like? That’s important.

Then we narrow the group from 5 to probably 2 or 3, and we have in-person meetings with them in your hometown. They’ll come see the practice after hours, and then we’ll go to dinner. It’ll be a nice steak dinner. They’re going to tell you how great you are and how great their business is. But ultimately it’s about the people. Can I see myself working with these people? You always want to get someone there from their side who isn’t an M&A person, because the M&A person is going to move on and keep working on deals. You want someone you’ll be working with day to day: the CEO, CFO, COO, chief clinical officer, or another doctor who has partnered with them. After those dinners, you call for final offers.

[00:28:54] Best And Final, The LOI, And Due Diligence

Luke Infinger: Best and final.

Brian Christensen: Best and final. That’s where we really start negotiating, probably with the group the client actually prefers. If the client says, I really want Group A, then we do everything we can to maximize value and structure with Group A. Assuming we get an offer the client wants to move forward with, they sign a letter of intent. The way I describe it: you’re not getting married, but you’re getting engaged and planning the wedding.

Luke Infinger: And that’s what triggers diligence.

Brian Christensen: That’s what triggers diligence. It’s been a lot of work to get to this point, and doctors reach this high, and then it’s, oh man, I have 60 to 90 more days of…

Luke Infinger: Really kind of hell.

Brian Christensen: It is hell, because they’re a business owner, they’re seeing patients, they’re a mother or a father, a husband or a wife, and oh, by the way, they’re selling their business. It’s a lot for 60 to 90 days. We do our best to take that off them, but there are some things we can’t do.

Luke Infinger: Right. You’re not going to know what happened 5 years ago.

Brian Christensen: Why did you terminate this employee 3 years ago, and all those things. There are 3 or 4 major diligence streams between signing an LOI and closing on the partnership. One is a quality of earnings. This is a third-party accounting firm the buyer brings in to justify the numbers and make sure everything checks the box.

Luke Infinger: So they’re going to poke holes and push back, and you’re going to have to say, here’s what that was.

Brian Christensen: You got it. That’s one stream. For the most part, people look for it to be confirmatory rather than an exercise in poking holes in the numbers. Two is legal. There are hundreds of pages of legal documents, and you want an attorney who knows dental M&A or healthcare M&A to look at this transaction. You don’t want to use your brother-in-law, the part-time dog walker.

Luke Infinger: That slows down the deal massively.

Brian Christensen: It slows down the deal. They have to learn dentistry, M&A, healthcare, corporate practice of medicine, or corporate practice of dentistry on your time.

Luke Infinger: Do you have attorneys you work with?

Brian Christensen: We do.

Luke Infinger: So you probably make those introductions early.

Brian Christensen: We do that at the LOI stage. We have preferred attorneys we work really well with. We know they serve clients well, and the pricing is very affordable. So you have quality of earnings, you have legal, and then you have what I call operational diligence, where the buyer or DSO prepares for your business to integrate into theirs. That’s HR, technology, compliance.

Luke Infinger: What PMS system are you on?

Brian Christensen: It’s all the operational pieces, so that when the close happens and everyone’s celebrating, it’s actually time for them to go to work integrating your business into theirs.

[00:31:56] How Long The Whole Process Takes

Brian Christensen: Everything I just explained, from start to finish, if we’re running hard, is probably 6 months. We’ve done one in 5 and a half months; we were all running very hard, and it was a great outcome for the client. But usually it’s 6 months. And life happens: kids’ soccer games, kids’ football.

Luke Infinger: Vacation.

Brian Christensen: You go on vacation. We had one client go to Japan for a month, and we didn’t do anything. Life happens, stuff with the business happens. So it’s a push-pull, because when you have momentum with buyers, you want to capitalize on it, because they have to move on.

[00:32:36] Growing During The Process And The Exit Multiple

Luke Infinger: What happens when someone is in process and they hit a stride, and now the business is growing way faster? Does that matter?

Brian Christensen: It does. You have to understand whether it’s momentary or whether it will continue for the foreseeable future. Largely speaking, trends matter. When we talked about EBITDA, Luke, people look at your last 12 months of profitability, and they call that…

Luke Infinger: Trailing…

Brian Christensen: Trailing 12 months.

Luke Infinger: There are all these buzzwords you have to learn.

Brian Christensen: All these finance guys, and I’m including myself, create buzzwords and acronyms that make us sound cooler than we really are. So that’s trailing 12-month EBITDA. But recently, Luke, yes, that matters, but what did you do in the last 3 months? The last 6 months? Because that’s a better predictor of what’s going to happen in the next 3 to 6 months. So we always tell clients, whenever you engage with us, pedal to the metal, because trends matter.

Luke Infinger: Work Saturdays.

Brian Christensen: Work Saturdays, work Sundays. Well, actually not, because they’re going to expect you to keep that up going forward. But trends matter. A lot of times, Luke, people engage us and then take their foot off the gas. No, you need to put the pedal to the metal there.

Luke Infinger: That’s when they need to come work with HIP.

Brian Christensen: Well, they need to come work with HIP way before that.

Luke Infinger: Grow the EBITDA first.

Brian Christensen: That’s right. But it depends on whether the growth is sustainable or a moment in time, a pop. The trend over the last 3 to 6 months will help drive the exit multiple, if I’m being honest. So I think that calls for a higher exit multiple.

Luke Infinger: So if you’re having rapid growth in process, and let’s break down the multiple in a second, you could maybe argue, hey, we can get you a 6x or 8x instead of a 5.

Brian Christensen: Correct.

Luke Infinger: And alternatively, if you don’t go pedal to the metal and there’s a dip, you won’t have that leverage in the negotiation.

Brian Christensen: You lose leverage. And sometimes, if there’s a dip that can’t be explained, buyers lose interest altogether.

Luke Infinger: They may back out.

Brian Christensen: The growth thing is interesting, Luke, because some people say, well, I’m growing so much right now, why would I do it? I totally understand. But your business is probably worth the most when it’s up and to the right, not when it’s steady.

Luke Infinger: And you really want to be in the middle. Not at the top, because when you’re at the top, where’s the only place you can go?

Brian Christensen: Down. So you want to be in the middle of your growth trajectory, not at the beginning and not at the end. Those trends help drive the exit multiple the buyer puts on your business.

[00:35:26] Earnouts And Growth Bonuses

Brian Christensen: There are also mechanics we can put into the deal itself that reward future growth. Those are called growth bonuses or earnouts. I’m a big proponent of them if they make sense for the deal. A lot of times they don’t.

Luke Infinger: So ideally, what should that look like if it’s going to make sense?

Brian Christensen: It needs to be achievable. Here’s what buyers will do, and I’ll use simple math. Buyers say the business is worth $8 million today, and we’ll give you another $2 million a year from now if you grow to X, Y, and Z. The way they position it, they’ve given you a $10 million offer. You can go tell your friends, I got a $10 million offer, and my buddies only got $7, $8, or $9 million. I got the greatest offer ever.

Luke Infinger: But the buddies actually got their money.

Brian Christensen: They actually got their money. The challenge is that if that $2 million set aside for a future incentive isn’t achievable, you didn’t get a $10 million offer. You got $8 million, which is probably still a great deal. Usually only you know whether it’s achievable. Can I really do that? If it’s not achievable, why are you counting it? That’s where a lot of DSOs start adding these crazy growth bonuses or incentives.

Luke Infinger: Make it look sexy.

Brian Christensen: Make it look sexy and awesome, so you can tell your friends on Facebook you got the greatest offer ever: 15x. Yeah, but you got 8x at close. The rest is who knows, and not achievable.

[00:37:24] EBITDA Thresholds, Ceilings, And Multiples

Luke Infinger: Let’s talk about EBITDA and multiples. What’s the threshold to start getting a much higher multiple? You can give ranges.

Brian Christensen: There’s a threshold, and there’s a ceiling.

Luke Infinger: So you can be too big?

Brian Christensen: Depending on the number of providers. I’d say multiples start moving a little at about $1 million of earnings, or $1 million of EBITDA. But there’s a world where you have too much EBITDA if you’re not scaled the right way. If you’re a single provider in a tough-to-recruit market and you have $5 million of EBITDA, that’s a fantastic business. But if I’m the buyer, I’m so scared of that.

Luke Infinger: Because I buy you…

Brian Christensen: …and what the hell am I going to do with it? You’ve squeezed everything out of it. That’s fantastic for you personally.

Luke Infinger: And on the other side, are you going to continue to work the same way?

Brian Christensen: Right. Everyone takes that risk once you get a check. In fact, because we’ve seen businesses in that situation, we’ve told people, your business will be worth more if you hire more people. Hire an associate or bring on another partner. Yes, it may affect your profitability, but your multiple will be a lot higher. There’s a threshold at the bottom, which is about $1 million of EBITDA, and there’s also one at the top. If it’s an unhealthy amount of EBITDA for the number of providers, there’s a lot of key man risk. Buyers say, yes, we’ll do a deal, but at a very low multiple and very structured. We’ve dealt with that. We always recommend building your business so that if you leave for a month, it keeps going. A lot of times people build a business so dependent on them that they can’t scale it past a certain threshold.

Luke Infinger: So you’ll get dinged for that.

Brian Christensen: You’ll get dinged for that, for sure.

Luke Infinger: What are you seeing right now? Back when things were hot, it seemed like everybody was going to sell their practice. We should also talk about DSOs versus OSOs, dental versus ortho, and the market there. But on average, say I bring you a practice with $2 million in EBITDA. What’s the multiple?

Brian Christensen: Where is it located? Give me a little more.

Luke Infinger: Say it’s in the Southeast, about an hour outside Atlanta. One-doctor practice, but maybe open to bringing on an associate. $2 million in EBITDA. What’s my multiple?

Brian Christensen: You’re probably at 7.5 to 8.5 there. You’re getting close to that threshold where there’s a lot of key man risk. We had a client in the Southeast with $3 million of EBITDA and one doctor, and it just scared people.

Luke Infinger: So say they had an associate at $3 million. What would that unlock?

Brian Christensen: You’re probably getting an A+ there. Now, if the associate is really important, you probably need to give them a cut of the deal.

Luke Infinger: How do you do that? Is it a bonus on the transaction?

Brian Christensen: It could be a bonus on the transaction. It depends on what the associate wants, what the buyer thinks they should get, and what you think they should get. It’s a conversation.

Luke Infinger: Because they could get equity in the new company.

Brian Christensen: They could get equity in the DSO or OSO. They could get a joint venture or future profits from the practice going forward. They could get a signing bonus, which is cash. But that’s a fantastic business, and it would draw a ton of interest. I think 8x is probably fair.

[00:41:29] The Most Common Deal Blockers

Luke Infinger: You’re doing 20-plus transactions a year. What are the top 3 blockers for a deal that you see over and over, maybe even something you tell people on an intro call that they need to fix? You talked about key man risk, so maybe that’s one.

Brian Christensen: Not including a financial advisor or your CPA sooner.

Luke Infinger: So the financials are a wreck.

Brian Christensen: The financials are a wreck, in a sense. What I mean is, as an M&A advisor, I don’t know what you, the client, need out of a transaction. Do you need a bigger salary? More cash? Are you in a very expensive part of life where you need a joint venture model for cash flow purposes? I don’t know any of that. I don’t know how much you’ve saved or how much you’ve invested. So we actually prefer to work with financial advisors. We think that’s the best service to the client in getting a transaction done that meets their financial needs. I don’t have 20 years of history to know that their kid wants to go to Harvard and it costs XYZ, or their kid wants to go to Stanford, or that they have a bit of a spending problem so they need a joint venture model, or that they hold a ton of Nvidia stock so they don’t need more high-risk stock and need a steady group. All those things matter for happiness later on.

Luke Infinger: So you need the full financial picture.

Brian Christensen: I need the full financial picture. I think that’s the best service to the client.

This is going to sound a little tongue-in-cheek, but fewer opinions. I just said I want the opinion of a financial advisor, but what you don’t need is opinions from your dog walker or your buddy. Luke, one time we had a client who said, one of my best friends is in private equity and I want you to talk to him. Okay, that’s interesting. The guy sold reps and warranties insurance.

Luke Infinger: Oh boy.

Brian Christensen: To private equity-backed companies.

Luke Infinger: So a complete waste of time.

Brian Christensen: A complete waste of time. Fewer opinions is actually better. One thing I’d really focus on is who your team is. Probably your spouse, and maybe your practice manager if they’re trusted. You need an M&A advisor. I’d love for you to hire us, but hire someone. It’s worth it.

Luke Infinger: CPA.

Brian Christensen: A CPA or financial advisor, and a tax expert. Then eventually, if you pursue a transaction, an attorney. That should be your core team. Anything outside of that starts to get really noisy. The biggest thing is probably too many opinions.

[00:44:25] The DSO Market: Consolidation Of Consolidators

Luke Infinger: What are you seeing strictly in dentistry right now? The DSO market. Are more deals being done this year than last year?

Brian Christensen: What we’re seeing is pretty fascinating. We talked about 300 DSOs out there. Four or five years ago, when debt was cheap, all of them were buying this practice and that practice. Now we’re starting to see aggregation of those DSOs. Large DSOs are buying smaller DSOs, or what we call emerging DSOs. So Heartland or MB2 or Smile Doctors or Paradigm Oral Surgery is buying a group of 20, 30, 40 practices that meets a geographical need or a strategic fit. We’re just now starting to see that. We’ve actually represented a few of those, and it’s been awesome for us to play a role there.

Luke Infinger: So consolidation within dental.

Brian Christensen: Consolidation of consolidators, and it’s happening right now. I think I just saw Heartland bought a 33-location group last week. Smile Doctors bought myOrthos. Those things are going to keep happening, and I think that’s great for the industry. Fewer options is okay here.

Luke Infinger: Best wins.

Brian Christensen: Best wins.

[00:46:01] Recaps, Liquidity, And The Path To Going Public

Brian Christensen: The other thing we’re seeing relates to recaps, which we mentioned earlier. What is a recap? A private equity investor owns a DSO, like MB2, and eventually that investor needs to sell its interest to another investor in hopes of achieving a return. I wish I had a whiteboard to draw it all out.

Luke Infinger: At the top you always hear about the big ones. BlackRock. Blackstone. What’s the other?

Brian Christensen: KKR.

Luke Infinger: KKR. Is State Street one? Am I hallucinating?

Brian Christensen: I think you’re hallucinating.

Luke Infinger: I might be, at this point in the podcast. But you always hear KKR and BlackRock at the top. And maybe the next step after that is who’s going to go public?

Brian Christensen: That’s what’s interesting. These businesses started with very small investors called lower middle market private equity firms, which invest in businesses with between $5 million and $30 million of EBITDA. They scale them, grow them, add a lot of infrastructure, and then sell them to a mid-market private equity firm. That mid-market firm does some things to it, and then sells it to one of the big boys: BlackRock, Blackstone, KKR. At the same time, recaps haven’t been happening as frequently as they were in ’21 and ’22. Why? The cost of capital has gone up, and all these firms use financial engineering, or a heavy debt load, to finance acquisitions, both at the practice level and for DSOs.

We used to think of getting liquidity from a DSO as, well, I need a recap. But private equity guys are the smartest guys in the room, and they’ll tell you that, by the way. What we’re starting to see is private equity saying, we have to create other avenues of liquidity besides the traditional recap process. What does that mean? We’re seeing a few things. One, Paradigm Oral Surgery just bought out BlackRock.

Luke Infinger: I saw that.

Brian Christensen: BlackRock had a healthcare fund, and they were getting out of the healthcare space altogether. That was a strategic decision on their part. So Paradigm said, okay, we could sell to another private equity group, or what if we bought it? Well, they bought it. What does that mean? Paradigm is now a $3 or $4 billion company, so kudos to their leadership for building an amazing company. Now they have the power to create whatever form of liquidity they want, whether that’s annual liquidity or a dividend every year. They’re going to be a test case for that.

On the other side, we just saw some groups merge, or large groups acquire smaller groups. Why? The Thurston Group, one of the best private equity sponsors in the country, was the initial backer of US Endo, Smile Doctors, and US Oral Surgery, so they’re pretty good at investing in dental. They had 3 GP groups, SGA, Modis, and Gen4, each focused on different things and different geographies, and they just merged all 3. Tyree & D’Angelo Partners, another private equity sponsor, had 3 GP groups in different geographies and just merged all 3. What are they doing? They’re trying to get enough scale to pursue a public offering. That’s the next wave, Luke. Rather than going from private equity sponsor 1, then 2, then 3, maybe a 4th, just go public. But you have to achieve scale to do that, so they’re putting these together first.

Luke Infinger: Because then people have to buy your stock.

Brian Christensen: You got it. Has it happened before? Yes. Park Dental Partners, a microcap DSO up in the Midwest, went public a year and a half ago. The ticker is PARK if you want to look it up. It opened at $13 per share, and it’s now trading at $20 per share. So there’s a test case. If a microcap can do it with, I don’t know, $5, $7, $10 million of EBITDA, why can’t the group Thurston just put together do it with $50, $75, or $100 million of EBITDA? That’s much better scaled than Park. So again, we’re seeing all these different ways groups are trying to create liquidity that doesn’t rely on the traditional recap process.

[00:51:20] The Orthodontic Market

Luke Infinger: So we hit dental. Let’s niche down and talk about ortho. What are you seeing specifically in orthodontics?

Brian Christensen: Ortho’s weird.

Luke Infinger: That’s one way to say it.

Brian Christensen: That’s one way to say it. I love orthodontists. It’s been, honestly, a little bumpy.

Luke Infinger: I’ll tell you what I’ve seen. If you Google it right now, I think it says something like orthodontics is up 3.5%. I call it flat, or maybe even slightly down, and here’s why. The cost of everything else has gone up. You’re paying team members more. You’re paying more for supplies. If you’re opening a satellite, the build-out and the lease are all going to cost more. I think that outweighs the 3.5 or 3.6% of growth.

So what I’m seeing is a lot fewer transactions. But also, and check me on this, the reputable OSOs have gotten smarter, and they’re doing JVs, which I actually prefer, because the doctor still has skin in the game. What I saw in ’21 and ’22, and it’s justifiable, is the founding doctor would get a deal, and then I’d be talking to them and they’d say, yeah, I’m only working 1 day a week now. Okay, what’s the practice doing? Oh, we’re not really growing like we were. With these JVs, they’re continuing to have bumper years and figuring out how to grow, because maybe they still own 40% of the business.

Brian Christensen: Incentives are definitely aligned there. I’d say it’s honestly just been weird, and it’s hard to figure out what normal is. I think now we’re at a normal steady state. We had 2020. The first half of 2020 was pretty rough, and the second half was actually pretty good. ’21 was a banner year, and part of ’22 was a banner year. Then everyone just kept thinking they’d ride the wave, and a lot of the acquisitions in the OSO or ortho space happened in ’21 and ’22.

Luke Infinger: Everybody. It’s interesting. People always text me, hey Luke, what are you seeing in the market? And I say the same thing every time in a different way: there’s no way to predict what’s going to happen. Practice A looks just like practice B, but maybe they’re in a different part of town or a different region, and one is blowing and going while the other is down 1 or 2%, or flat. Same offer, same marketing.

And this is fascinating: we see practices with a 500% ROI. What does that mean? Their investment with HIP plus ad spend is returning 500, 600%, but they’re still flat. Here’s the thing. Remove that, and what would it be like? Do you want to be flat, or do you want to be down 10%? So it’s very interesting, based on what area of the country…

Brian Christensen: Area of the country, and what your patient demographic is. If you have a lot more adults… I’m a simple guy. The way I think about it is, when things get tight, mom can get Invisalign next year, but you’ll do anything for your kids.

Luke Infinger: Or she’ll get it at her dentist for half the cost. Dentists are now the biggest competitor to ortho on clear aligners.

Brian Christensen: 100%. And the other thing, Luke, is I don’t know if we’ll have any pure-play OSOs 5 years from now. I think we’ll move into multi-specialty groups. We’re already seeing a lot of that with pedo-ortho, or pedo-ortho-OMS. I think we’ll see more pedo-ortho in the next 5 years, or groups consolidating and starting to acquire pedo. I don’t know if we’ll have any pure-play ortho in 5 years.

[00:55:32] How To Reach 7 Pillars And The Upcoming Event

Luke Infinger: That’s fascinating. We covered a lot of ground. If someone listening or watching realizes they need to talk to somebody, who should they reach out to? How do they get ahold of you?

Brian Christensen: We’d love to have a conversation, tell you what we’re seeing, and understand your goals. You can reach us at 7pillarsadvisory.com, and we’ll get you connected to the right people.

Luke Infinger: Amazing. And to plug the event we’re planning next year: when and where is it? We don’t have a sign-up page yet, but let’s tell people about it.

Brian Christensen: For now, they need to reach out to either 7 Pillars or you at HIP. Essentially, we’re going to have a small-group setting about practice growth, practice transitions, and what to do with the wealth afterward. It’s tailored to people who want to scale and grow for a purpose and want to know what to do with it all afterward. It’s going to be a very small group, not a massive lecture hall. It’s going to be 15 to 20 doctors.

Luke Infinger: Very strategic.

Brian Christensen: Very strategic and very high-end. We’re going to have some big names there, including Mr. Ben Fishbein, and you, of course. It’s going to be awesome. I’m really looking forward to sitting next to people who are all working toward the same thing.

Luke Infinger: Awesome. And that’s going to be…

Brian Christensen: September 27th.

Luke Infinger: All right. Thanks for coming on the GrowOrtho Podcast. Looking forward to having you on again.

Grow The Numbers Before Buyers See Them

Buyers price your practice on the trend in your last three to six months. If you want new-patient growth working for you before you talk to an advisor, book a growth call with HIP Creative: https://hip.agency/landing/discovery/

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