The Dutch oral care sector is changing rapidly. Private equity is increasingly buying up dental practices, creating larger chains. 'Starting from six treatment rooms, an acquisition of a dental practice only becomes attractive.'
Whereas dental practices used to operate independently, they are now increasingly forming chains. A recent market analysis by ABN Amro shows that chain formation within oral care in the Netherlands began more than a decade ago. However, the bank stresses in the analysis that despite the growth in the number of acquisitions and chains, the oral care market is still highly fragmented today.
According to the Royal Dutch Dental Association (KNMT), by 2025 the Netherlands will have about 4,400 dental practices, 13% of which now belong to a chain. This means that the majority therefore still operate independently. Chains are limited in number, but their market share is large because of multiple treatment chairs per practice. This is not only due to chain formation: the number of dental practices is expected to decrease further in the coming years. For example, about 40% of dentists over 60 will reach retirement age in the coming years, while the traditional home-based practice - in the middle of a residential neighborhood - is increasingly disappearing.
Chain formation
Private equity acts as the driving force behind many of the acquisitions and has accelerated consolidation in the sector. The premise of a private equity party is to create a chain of practices in which economies of scale are exploited and the business model optimized. Think sharper purchasing, offering multiple specialties and maximizing returns from practice operations. Administration, marketing and HRM are organized centrally. Within a few years, a chain can grow from a few to dozens of practices, with centralized administration, purchasing advantages and standardized protocols. This allows the costs of personnel, expensive equipment and premises to be spread over a larger number of patients.
An example that shows that chain formation need not be without risk is Colloseum Dental owned by Swiss holding Jacobs Holding and operating in the Netherlands and ten other European countries. After acquiring Curaeos, also active in the Netherlands, the business ran into significant integration problems, internal complexity and financial pressure, which eventually led to a restructuring. It illustrates how fast-growing chains can be vulnerable when growing too fast and also how investors can sometimes literally "bite the bullet" on acquisitions in oral care.
Involved by earn-out
Private equity bundles practices and creates larger players that can work more efficiently and spread costs better. The oral care industry consists of many small practices, so investors see opportunities to string together these relatively small practices through a buy-and-build strategy to create scale. Most chains therefore use an active buy-and-build policy: a large number of practices are bought up in a short period of time, which are then sold on after a few years at a higher multiple to another (larger) private equity party. This allows investors to make substantial returns, often with the goal of a relatively quick exit after five to seven years.
Nancy Jonkman-Koenis, sector specialist Medical at ABN Amro and a specialist in oral care, expects chain formation in the dental industry to increase less rapidly in the coming period than in previous years, but that growth will continue steadily.
'Many dentists over sixty are retiring in the near future and want to sell their practice including patient base to secure their old-age pension,' she explains. 'In addition, we are seeing a group of dental doctors who once chose the profession because of the content of working with patients, but who take less pleasure in entrepreneurship and the administrative or HR tasks that come with it. They too are increasingly deciding to sell their practice.'
Jonkman-Koenis emphasizes that not every practice is interesting to buyers of dental practices. 'From six treatment rooms it only becomes attractive; one or two is just too small,' she says. Nor is it the case that a dentist leaves immediately once he has sold his practice to a chain or investor. 'Many dentists remain involved via an earn-out for several years and continue working in the practice they have sold,' says the ABN Amro sector specialist.
3.5 to 8 times EBITDA
Private equity has played a dominant role in mergers and acquisitions in this sector since 2018. After a period of exuberant transactions, enthusiasm cooled somewhat: large chains such as Curaeos turned out to be less financially successful than expected and therefore could not live up to expectations.
Moreover, the debacle surrounding the aforementioned Colosseum Dental and the investigation by the Dutch Healthcare Authority (NZa) into rates in oral care created additional uncertainty in the market. On top of that, the VBAR Act posed a risk to acquisitions, because many dentists work as self-employed and the law calls into question their position within the practice, which also put further pressure on the valuations of dental practices.
Buyers previously paid sometimes up to 16 times EBITDA for chains, leading to write-downs and restructuring. According to the Brookz Takeover Barometer, the EBITDA multiple in the healthcare sector is now between 5.9 and 6.9, still higher than the SME average of 4.9. Jonkman-Koenis of ABN Amro estimates that for a well-run dental practice today, the average price paid is between 3.5 and 4 times EBITDA, while for a chain it can be as high as 8 times EBITDA.
There are dentists who once chose the profession because of working with patients, but enjoy entrepreneurship less and decide to sell their practice
Recently, the market is moving again. In a short time, four large chains changed hands: Denteam to Clinias (Bencis Private Equity), The Dentists Group to Oral Care (Axcel), Puur Mondzorg (5CS Capital Partners) to Belgian Dentius (Florac) and Fresh Dentists from Livingbridge to European Dental Group (Nordic Capital). The rebound is partly due to lower valuations, making transactions more economically feasible. Investing in oral care remains attractive: patients continue to come, even in economically uncertain times, and the revenue stream is stable thanks to the (supplementary) dental insurance that many Dutch people take out. Research by the KNMT shows that about 63% of the population has supplementary dental insurance.
The consolidation, driven by private equity, has led to a clear leading group: Top Mondzorg (part of European Dental Group) with about 170 practices after its integration with Fresh Tandartsen, and Colosseum Dental with about 110 locations.
Chain without investors
In addition to the growth of chains, ABN Amro s market analysis on oral care also identifies the emergence of practices where a dentist entrepreneur runs multiple branches. A good example of this happening on a larger scale is Lassus Tandartsen in Amsterdam. Led by dentist and entrepreneur Thomas Rietrae, Lassus bundles practices where quality of care and independence of the dentist are central.
With thirty branches, eight hundred employees and a revenue of approximately 75 million euros, Lassus shows that economies of scale and efficiency are also possible without the interference of private equity. Practices retain their own identity and decision-making power, while benefiting from joint purchasing, marketing and administration. The idea here is that the practices join Lassus without dentists losing their independent position and responsibility for patient welfare.
Rietrae warns that financial motives should never outweigh quality of care. According to him, chain formation with private equity is only responsible if the independence of dentists and the substantive quality of care remain guaranteed. Therefore, he deliberately chooses a model without external investors - with a longer horizon and focus on people-oriented management.
Patient first
Although scale creates efficiency, the patient's interests are not always paramount. Chains can lead to standardized care, shorter consultation times and less personal attention. As a result, economically logical decisions sometimes have unwanted consequences for patient satisfaction and quality of care, clouding the relationship between dentist and patient and putting pressure on customized care.
To limit this, in the summer of 2024, Minister of Health, Welfare and Sport, Fleur Agema, proposed tightening the care-specific concentration test. This will give the NZa more authority to test acquisitions and mergers for their effect on quality and continuity of care, which may limit future chain formation in oral care.
You read a story from the new Brookz 500. Wondering what other opportunities and threats lie ahead for entrepreneurs in the acquisition market in 2026? If so, you can order the new edition at the click of a button.
