Is Your DSO Offer a Good One? How to Evaluate It in 2026

The email usually arrives on a Tuesday. Somebody has attached a one-page summary with a big number near the top, and the dentist reading it has no idea whether to be thrilled or insulted.

I got a call from an owner in exactly that position who opened with the only sentence that matters: “It’s more money than I’ve ever seen written down. Is it good?”

Here is the honest answer, and then the useful one. A single offer cannot be judged good or bad, because there is nothing to judge it against.

But there is a great deal you can work out on your own before anyone else gets involved.

Is my DSO offer good? You cannot tell whether a single offer is competitive, because one bid has no benchmark. What you can do is convert it to a multiple of adjusted EBITDA, separate the cash from the at-risk money, and price the terms.

Do that and you know what the offer is. Only competing bids show if it is enough.

Key takeaways

• Convert the headline to a multiple first. Until the offer is expressed as a multiple of adjusted EBITDA, no comparison you make with anything is valid.
• Two identical headline numbers can differ by seven figures. The split between cash at close, rollover equity and earnout is where the real difference lives.
• Rollover equity is an investment, not a payment. Ask where it sits, what ranks above it, and what event turns it back into cash.
• The terms are worth real money and all of them are negotiable. Post-sale hours, compensation basis, team protections and the non-compete are priced items, not paperwork.
• Competitiveness is the one thing you cannot determine alone. That is a structural fact about having one offer, not a failure of analysis.

A quick definition first, because the acronym gets thrown around loosely.

A DSO is a dental support organization. It owns the non-clinical side of a practice and runs everything outside the operatory, while a licensed dentist keeps ownership of the clinical entity.

That split exists because most states restrict who may own or control a practice. A 2012 congressional survey counted 22 states plus the District of Columbia barring non-dentist ownership outright.

The doctrine has evolved since, but it still dictates the shape of every structure you will be shown.

Step 1: convert the offer into a multiple of adjusted EBITDA

If the number in front of you is expressed as a percentage of collections, stop. That figure is not comparable to anything you have read, and it is not comparable to the offer your colleague got last year.

Adjusted EBITDA is what the practice earns in pure operating profit after paying a market-rate dentist to do the work you currently do yourself. It is the number every buyer prices from.

The full bridge from collections down to that figure is its own subject, and I have walked through it at length in what a dental practice is actually worth, so here I need only the last step of it.

Take the practice I will use for the rest of this article. It collects $3.2 million a year across two locations.

After real overhead, and after paying market rate to replace the owner’s own chair time, adjusted EBITDA lands at $640,000.

The offer arrives quoted at 160% of collections. That is $5,120,000.

Now divide. $5,120,000 over $640,000 is 8x adjusted EBITDA.

That single division is the most valuable thing an owner can do in an afternoon, because it converts a figure that means nothing on its own into one that can be placed against the size bands in what dental practices actually sell for.

Skip it and every subsequent judgment rests on a percentage that varies with your overhead rather than your worth.

Step 2: take the headline apart

Here is where most of the money hides, and it hides in plain sight.

Transaction counsel who handle these deals routinely report that sellers commonly receive 60% to 80% of the purchase price in cash at closing. The balance arrives as ownership in the DSO or its parent.

Earnouts, where they appear, often run as 10% to 20% of gross receipts over a defined period.

So take two offers on our $3.2 million practice. Both are written at $5,120,000.

Both are 8x.

	Offer A	Offer B
Headline value	$5,120,000	$5,120,000
Implied multiple	8x	8x
Cash at close	$4,096,000 (80%)	$3,072,000 (60%)
Rollover equity	$1,024,000 (20%)	$1,024,000 (20%)
Earnout, contingent	$0	$1,024,000 (20%)
Money that is certain today	$4,096,000	$3,072,000

The certain money differs by $1,024,000. That is not a rounding difference.

On this practice it is a year and a half of collections.

Now apply your own judgment to the at-risk portions. There is no market discount rate for this and anyone who quotes you one is guessing.

But suppose you decide the rollover is worth 70 cents on the dollar and the earnout is a coin flip. Offer A comes to $4,812,800.

Offer B comes to $4,300,800.

The gap is $512,000, and it is precisely half the earnout. Every dollar of separation between two identical headlines came from the slice you might not receive.

Run that arithmetic with your own numbers before you form an opinion about either offer. It takes ten minutes and it changes what you are negotiating about.

Step 3: value the rollover honestly

Rollover equity means keeping a slice of ownership in the buyer’s company instead of taking all cash at close. It is often sold to owners as the best part of the deal.

Sometimes it is. It is never the simple part.

Three questions decide what it is worth, and none of them appear on the summary page.

Where does the equity actually sit? Equity in the practice entity you just sold is a different instrument from equity in the platform’s parent. Ask which one, in writing, and ask what percentage of that entity your dollars represent.

What ranks ahead of you? Private equity sponsors typically hold preferred positions that get paid before common holders when a sale happens, so a liquidation preference sitting above your slice means a modest exit can repay the sponsor in full and leave very little behind it.

What event turns it into money? Rollover equity is commonly illiquid, non-transferable and subject to forfeiture, its exit rights are frequently limited to defined events such as a recapitalization or retirement, and termination for cause can trigger a mandatory buyout at a reduced valuation.

That third question is the one owners underestimate. You are accepting an asset whose conversion date is set by somebody else.

The recapitalization clock, and the platforms that do not have one

The upside case for rollover rests on a specific event. The platform gets sold again at a higher multiple, and your slice rides up with it.

That event is real and it is broadly expected, with reporting in 2026 putting 78% of DSOs anticipating a recapitalization within 12 to 36 months and 69% saying their sponsors expect a moderate or high increase in acquisition activity.

But expected is not the same as scheduled. Becker’s has reported failed recapitalization attempts at sizable groups, driven by more expensive debt and softer operating performance, alongside notably extended holding periods for dental investments.

Here is the part almost nobody explains at the kitchen table. A platform with no private equity sponsor behind it has no recapitalization clock at all.

Doctor-owned and employee-owned groups exist, and some of them buy practices. Their rolled equity is not waiting for a sponsor’s exit, because there is no sponsor and no fund life driving a sale.

That is a genuinely different instrument. It typically pays through ongoing distributions rather than a future mark.

Which means it may be steadier. It may also never produce a windfall, so it should be valued on cash yield rather than on a multiple you hope somebody else pays in four years.

Neither model is better. They are just different.

An owner comparing two rollover offers without knowing which one they are holding is comparing a bond to a lottery ticket.

Step 4: stress-test the earnout

An earnout is part of the price paid later, only if the practice hits agreed targets after closing. The test has two halves, and owners almost always run only the first.

Half one: are the targets reachable? Put the target against your actual last three years and ask what growth rate it implies, because on our practice an earnout that pays out at $800,000 of EBITDA against today’s $640,000 needs 25% growth in three years.

Is that a stretch? It depends.

But at least you now know what you are being asked to do.

Half two: do the targets depend on things you will still control? This is the half that costs money, and it is the reason I read earnout definitions before I read prices.

After closing, someone else typically sets the fee schedule and negotiates payer contracts. Someone else approves hiring.

Someone else decides the supply vendors, the software, and whether a second office opens nearby that shares your overhead allocation.

If the earnout runs on EBITDA, every one of those decisions moves your number and none of them are yours anymore.

Ask directly: which line items in the earnout calculation can the buyer change unilaterally after closing? If the answer is most of them, the earnout is not a performance incentive.

It is a discount with a delay on it.

Revenue-based earnouts are usually cleaner than EBITDA-based ones for exactly this reason. Collections are harder for a buyer to move against you than a margin calculation with a dozen adjustable inputs.

And keep the earnout mentally separate from a holdback, which is a portion of the price the buyer retains for a defined period to back your representations. A holdback is not paid into a third-party account.

The buyer simply pays it later, or does not.

Step 5: price the terms, not just the number

Owners negotiate the price and accept the terms. That order is backwards, because several of the terms are worth six figures and every one of them is negotiable under competition.

Your post-sale role and its duration. Sellers are commonly required to keep working for three to five years after closing, and on a practice where you are still the one producing, three years versus five is nobody’s idea of an administrative detail.

How you get paid during that period. Your income shifts from practice profit to a formula, usually a percentage of production or collections. Model it against what you take home today.

The difference, multiplied by the years you are committed, is part of the price.

Your hours and your clinical latitude. Days per week, the scheduling template, the lab, the materials. State corporate practice rules reserve clinical judgment to the licensed dentist.

But a schedule that fills your chair to capacity is an operational decision, not a clinical one.

Team protections. Whether your hygienists and assistants keep their compensation, their benefits, and their seniority. This is the term owners care most about personally and negotiate least often.

Brand and identity. Whether the sign stays, whether the practice name survives, whether the website redirects. Some groups preserve local branding as a matter of strategy.

Ask, and get the answer into the document.

The non-compete, and a change in the law worth understanding

The restrictive covenant is the term with the longest tail. Radius and duration are both negotiable, and the enforceability question moved twice in the last two years.

Federally, the picture reverted. The FTC abandoned its nationwide non-compete rule on September 5, 2025, dropping its appeals and acceding to the courts’ vacaturs, which leaves enforceability to state law.

The agency did not walk away entirely. It sent non-compete warning letters to healthcare employers days later and has signaled case-by-case enforcement in the sector.

At state level the direction is tighter, and California’s SB 351, effective January 1, 2026, makes non-compete and non-disparagement clauses unenforceable in provider employment agreements tied to private equity or hedge fund involvement in a dental practice.

And here is the trap. The sale-of-business covenant is carved out. The restriction you sign as a seller, in the purchase agreement, is expressly outside the exception and remains enforceable.

So a dentist in California reads the headlines and concludes the new law protects them. Meanwhile the covenant that will actually bind them for years is the one it deliberately leaves alone.

Legislatures in several other states are moving in similar directions. Check your own state as it stands the week you sign, not as it stood when somebody wrote a blog post about it.

None of this is a reason to fear a non-compete. It is a reason to negotiate the radius and the duration deliberately, while you still have leverage.

Step 6: the one thing you cannot work out alone

Everything above you can do at your own kitchen table with a calculator and the draft documents. Now the honest limitation.

You can determine what the offer is. You cannot determine whether it is competitive.

That is not a gap in your analysis. It is arithmetic.

A single number has no distribution around it, so there is no way to know whether it sits at the top of what your practice would attract or near the bottom.

And the market is not thin. The Association of Dental Support Organizations counts more than 80 member companies supporting over 8,500 practices, and ADA research shows DSO affiliation among dentists climbing from 8.8% in 2017 to 16.1% in 2024.

Most of those groups will never hear that your practice is available, because you were approached by one of them privately and the conversation stayed there.

One structural point surprises owners. A regional group filling in a market it already operates in will often value your practice above what a national buyer pays for a scattered addition.

The owner who only answers the group that called them never finds that out.

Creating that comparison is what the Elite Selling System exists to do, which means we hand-select and vet every buyer who gets to bid on your practice, the way a doorman with a velvet rope lets in only the right people.

Then we run a private competitive window inside that group.

Competition changes the multiple. In my experience it changes the terms further.

Cash at close, the length of your commitment, the earnout definition. All of it softens when a buyer knows somebody else is reading the same financials.

What you now know, and what you do next

Run the six steps and you will hold a genuinely useful picture. The multiple.

The certain money against the contingent money. What the rollover actually is.

Whether the earnout is reachable and whose hands the levers sit in. What each term costs you.

There is a tax layer underneath all of this, because how the price is allocated across assets determines what you keep. Buyer and seller must report that allocation consistently to the IRS.

Goodwill and other intangibles carry their own treatment. Get your accountant into the document before you sign, not after.

What you will not have is a benchmark. And if the offer came from a single approach, remember that the group which found you first is not necessarily the group that values you most.

We will read the actual documents with you and tell you what the offer converts to. Including, sometimes, that it is already a strong number.

Start with a free, confidential practice value estimate and we will walk you through what we see.

Our fee varies depending on the value of the practice and is entirely success-based. If we do not get you a result, we do not get paid.

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Frequently asked questions

Is my DSO offer good?

You cannot tell from one offer, because a single bid has no benchmark. What you can determine alone is what the offer is: its multiple of adjusted EBITDA, how much is certain cash at close, and what the terms cost.

Competitiveness requires competing bids.

How do I convert a percentage-of-collections offer into a multiple?

Multiply the percentage by your annual collections to get the enterprise value, then divide by your adjusted EBITDA. The result is the multiple you are actually being offered.

Until you do this, the offer cannot be compared to any published range.

How much of a DSO offer is usually paid in cash at closing?

Across the market, sellers commonly receive 60% to 80% of the purchase price in cash at close, with the balance as rollover equity and sometimes an earnout, which is why two offers carrying the same headline can differ by a seven-figure sum.

What should I ask about rollover equity before I accept it?

Three things. Which entity the equity sits in, the practice or the parent.

What ranks ahead of it, particularly a sponsor liquidation preference paid first. And what event converts it to cash, since exit rights are often limited to a recapitalization or retirement.

Does rollover equity work differently if the buyer has no private equity sponsor?

Yes, substantially. A platform without a sponsor has no fund life driving a future sale, so there is no recapitalization clock and the rolled equity typically pays through ongoing distributions rather than a future exit, which means valuing it on cash yield.

How do I tell whether an earnout is realistic?

Test two things. Whether the target implies a growth rate you could plausibly hit measured against your last three years, and whether the calculation’s inputs stay under your control after closing, since fee schedules, hiring and vendor decisions usually pass to the buyer.

Are the non-financial terms actually negotiable?

Yes, and several are worth real money. The length of your post-sale commitment, how you are compensated during it, your hours, team pay and benefits, brand retention, and your non-compete are all negotiated.

They move most when more than one buyer competes.

Did the FTC ban on non-competes change my situation?

No. The FTC abandoned its nationwide non-compete rule in September 2025, so state law governs.

Note too that reforms such as California’s SB 351 carve out sale-of-business covenants, which means the restriction you sign as a seller generally remains enforceable.

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Sources

Deal structure, transaction process and legal analysis

1. Mandelbaum Barrett PC. “Navigating Types of Dental Transactions & the Financial Terms to Know.” mblawfirm.com
2. Mandelbaum Barrett PC. “The Four-Phase DSO Transaction Process.” mblawfirm.com
3. Cranfill Sumner LLP. “Selling Your Dental Practice to a DSO: What to Expect Before, During, and After the Deal.” cshlaw.com
4. Benesch, Friedlander, Coplan & Aronoff LLP. “Dental/DSO Industry Newsletter, May/June 2026.” beneschlaw.com
5. Holland & Knight. “Healthcare Private Equity Transactions Under Scrutiny.” hklaw.com
6. Congressional Research Service. “Private Equity Investments in Health Care: Selected Enforcement Issues.” congress.gov

Non-competes, corporate practice of dentistry and state law

7. Benesch, Friedlander, Coplan & Aronoff LLP. “California Enacts SB 351: New Restrictions on Private Equity and Hedge Fund Involvement in Physician and Dental Practices.” beneschlaw.com
8. Goodwin. “Antitrust & Competition Healthcare Year in Review 2025.” goodwinlaw.com
9. Holland & Knight. “Charting a Path Forward in 2026: Year-End Healthcare Antitrust Report.” hklaw.com
10. Holland & Knight. “Q1 Recap on Proposed Legislation Affecting Healthcare Consolidation.” hklaw.com
11. U.S. House Committee on Oversight. “Survey of State Laws Governing the Corporate Practice of Dentistry.” oversight.house.gov

Rollover equity, recapitalization and the buyer pool

12. Group Dentistry Now. “Accessing Dental Practice Equity, Mitigating Market Risk and Maximizing Long Term Returns.” groupdentistrynow.com
13. Becker’s Dental Review. “Why some DSOs are failing to recapitalize.” beckersdental.com
14. Becker’s Dental Review. “69% of DSOs plan to boost acquisitions in 2026: Report.” beckersdental.com
15. Becker’s Dental Review. “The big trends driving DSO growth in 2026.” beckersdental.com
16. Association of Dental Support Organizations. “About ADSO.” theadso.org

Practice economics and tax treatment

17. ADA Health Policy Institute. “Trends in Dentists’ Income, Revenue and Hours Worked.” ada.org
18. ADA Health Policy Institute. “Dental Practice Research.” ada.org
19. Internal Revenue Service. “About Form 8594, Asset Acquisition Statement Under Section 1060.” irs.gov
20. Internal Revenue Service. “Publication 544, Sales and Other Dispositions of Assets.” irs.gov