By Diwakar Sinha

I spend a lot of time talking with dentists who are evaluating their first capital event.

Most of the conversation centers around valuation, how much cash they’ll receive at closing, and whether the multiple is attractive. Those are important questions, but I believe the more important question is this:

What is your rolled equity likely worth at the second capital event?

If we use a baseball analogy, I would argue that dentistry is somewhere around the 4th or 5th inning of consolidation. There has been significant consolidation already, but the industry remains fragmented and there is still a long runway for larger groups and DSOs to continue building scale.

That means many dentists are stepping into their first transaction today, while the second transaction may be five to seven years away.

And that is where the math starts to get interesting.

Let’s say your practice is worth $15 million.

You sell a majority interest and roll $5 million into Platform B, which is worth $250 million today.

Five years later, Platform B has doubled in value to $500 million.

Your $5 million has now become $10 million. Sounds great.

But what if you had kept building independently? Could that same $15 million business become a $20 million or $25 million business over the next five years? That’s where the analysis gets more nuanced.

Now let’s look at a larger example.

Suppose your practice is worth $20 million, and you roll $7 million to $10 million into the platform.

If that platform doubles over the next five years, your rolled equity could become $14 million to $20 million.

If the platform triples, those numbers become even more meaningful.

The point is not that one path is always better than the other.

The point is that many owners spend months negotiating the first check and very little time evaluating the second one.

When you roll equity, you’re no longer just a dentist selling a practice.

You’re an investor. You should be asking questions like:

  • How fast can this platform grow?
  • What is the acquisition strategy?
  • How strong is the leadership team?
  • What does the balance sheet look like?
  • What could this business be worth at the next recapitalization?

Because the real return is rarely determined by what you receive today.

It’s determined by what happens to the dollars you leave behind.

The best outcomes I’ve seen are from owners who think two transactions ahead.

They don’t just evaluate the value of their practice.

They evaluate the value of becoming a shareholder in something much larger.

In the early innings of consolidation, that distinction can be worth millions.

The first capital event creates liquidity. The second capital event often creates wealth.

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