Dentist groups are expected to generate a lot of M&A activity in 2015, because the market is very fragmented, says Nick Barket, a partner at Detroit private equity firm Huron Capital Partners.

“The model gives dentists an option to sell their practice at a better valuation than trying to sell to a kid out of dental school, and takes off the burden of running a practice,” Barker explains.

The trend in dental practices parallels consolidation among physician groups and ancillary-care providers over the last few years. The mergers have been accelerated by the Affordable Care Act, which has attracted more patients into the U.S. health care system.

Two private equity firms have already formed companies that plan to make acquisitions in the dental area. In August, New York private equity firm Bregal Partners teamed up with Melbourne, Florida-based dentistry practice management company Dental Partners Inc. to start acquiring general dentistry-focused practices.

The duo will look to buy practices with between $5 million and $25 million in revenue in the southeast, Texas and Midwest. After deals for the practices close, Dental Partners plans to grow the companies with smaller, add-on acquisitions.

Huron is pursuing a similar strategy. In June, the firm recapitalized Spring & Sprout Dental Holdings LLC and formed a new platform company. Spring & Sprout provides support services to dental specialists in pediatric dentistry and orthodontics. The company plans to expand throughout the Midwest and into the south.

See the next trend in our special report: U.S. Manufacturing Industry Will Continue to Flourish

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