DSO Deal Structures: How Structure Shapes Value in Dental Practice Transactions

Co-Authored by Jett Puckett, MBA, JD, McClerran + Associates

When a dental practice owner receives a letter of intent from a DSO, the first number they usually see is the purchase price. However for both DSO buyers and sellers, the structure of the transaction can have a greater impact on long-term value than the headline multiple.

In today’s consolidated market, there is no single “standard” DSO deal. The structure of the deal determines how much cash changes hands at closing, how much equity the seller retains, whether the seller participates in future recapitalizations (a second bite), and how risk is allocated after the transaction closes.

Below is a practical overview of the most common DSO deal structures and how each one shapes value differently for sellers. First, we share a simple summary table. Then, we break down each deal structure. 

DSO Deal Structure Table

	100% Buyout (Cash Deal)	JV (Joint Venture)	HoldCo (Holding Company Equity)	Hybrid
Ownership Sold or Retained	Buyer acquires 100% and seller retains 0% equity	DSO buys 51-80%. Dentist retains 20-49% at practice level	DSO buys 100% of practice.	Practice sold (effectively controlled) and equity split between practice and HoldCo
Considerations (Cash vs. Equity)	All cash (or mostly all cash)	Majority cash at close. Retained equity is JV equity.	65-90% cash. 10-35% HoldCo stock.	Typically 60-70% cash. 15-20% JV equity. 15-20% HoldCo equity.
Economics or Ongoing Income	Seller earns income only through employment or associate role (if staying)	Practice profits distributed pro rata after expenses. JV pays management fee 5-9% of revenue.	No typical distributions or dividends. Income mainly via employment compensation.	Some distributions from JV equity. HoldCo equity usually has no distributions.
Recap (Second Bite Potential)	No equity upside or recap participation	Dentist can sell some JV equity at recap events, often 50% at first recap. Remaining equity is usually held down to 10-20% floor.	Equity value increases with DSP growth. Often liquidate 50% at recap and remainder later.	Upside at both practice and DSO level. Diversified recap opportunity.
Best Fit	Sellers who want a clean exit, near retirement, or de-risking	Younger doctors. Long runway to exit.	Doctors who believe in the DSO growth story. Longterm operators.	Doctors who want diversification.
Pros	Max liquidity at close. Simplest structure.	Meaningful liquidity and upside. Monthly or quarterly distributions. This is a true “partner” model.	Upside tied to DSO platform (bigger upside) Participation in future acquisitions.	Best of both worlds upside. Diversified equity exposure.
Cons	No second bite. No participation in future growth.	Less cash at close. Distributions burdened by management fee. Upside tied mostly to practice-level growth.	Less Cash at close. Value tied to DSO performance overall.	More complex and still reduces cash at close.

DSO Deal Structures Explained

100% Buyout (Cash Exit)

A traditional 100% buyout is a straightforward clean break. In this scenario, the DSO acquires the entire practice and the seller retains no equity. The consideration is typically all cash, or very close to it. If the doctor remains involved post-closing, it is strictly as an employee.

Key characteristics of a Cash Exit:

• Buyer acquires 100% of the practice

• Seller retains 0% equity

• Typically all or mostly cash at closing

  
  

This structure is most common for doctors seeking a clean exit. It maximizes immediate liquidity and eliminates future ownership exposure. From a value perspective, the tradeoff is clear. The seller has no participation in recapitalization events and no opportunity to benefit from platform growth. If the DSO later sells at a higher multiple, the former owner does not share in that upside.

For sellers near retirement or those looking to fully de-risk, the simplicity of this model might outweigh the loss of future equity participation.

Joint Venture (Practice-Level Equity Rollover)

In a joint venture structure, the DSO acquires a majority interest, typically between 51% and 80%, while the dentist retains a minority stake at the practice level, often around 40%.

The seller receives majority cash at closing, with the retained value converted into equity in the practice entity. Unlike a full buyout, this model allows the dentist to continue participating in practice profitability.

Ongoing profits are generally distributed pro rata after expenses. However, the practice usually pays a management fee to the DSO, often in the range of 5% to 9% of revenue, which impacts distributable income.

Value dynamics to consider:

• Practice profits distributed based on ownership percentage

• Management fees reduce net distributable earningsRetained equity may be partially monetized at recapitalization

  
  

This model works well for younger doctors or long-term operators who want liquidity but still believe in the growth of their individual practice. The retained equity’s value is primarily tied to practice-level performance rather than platform-wide growth.

HoldCo Equity (Platform-Level Rollover)

Under a HoldCo structure, the DSO acquires 100% of the practice, but a portion of the purchase price is rolled into equity at the holding company level.

A typical mix might include:

• 65%–90% cash at closing

• 10%–35% equity in the DSO’s parent entity

  
  

Unlike a joint venture, HoldCo equity does not typically generate regular distributions tied to the individual practice. Instead, the seller’s upside depends on the overall growth and valuation of the DSO platform.

This structure shifts the focus from practice-level value to enterprise-level value. If the DSO expands successfully and recapitalizes at a higher multiple, HoldCo equity can provide meaningful upside. If platform performance lags, however, the value of the rollover equity is directly affected.

For DSOs, this model simplifies operations by avoiding minority ownership at the practice level. For sellers, it requires careful review of dilution provisions, governance rights, and recap mechanics.

Hybrid Structure

Hybrid models combine practice-level equity and HoldCo equity. A seller might receive:

• 60%–70% cash

• 15%–20% practice-level (JV) equity

• 15%–20% HoldCo equity

  
  

This approach creates diversified exposure. The practice-level interest may generate distributions, while the HoldCo equity provides broader platform upside.

Hybrid deals are more complex to structure and document, but they can balance liquidity with diversified participation. For doctors who want both current cash flow and enterprise-level growth exposure, this model can offer flexibility.

Structure Is a Strategic Decision

Each DSO structure represents a different allocation of liquidity, control, and future equity potential. Two transactions with similar valuations can lead to very different outcomes depending on how equity is structured and when liquidity events occur.

For sellers, the critical questions include:

• How much cash am I receiving at closing versus rolling forward?

• Where does my retained equity sit: practice level or platform level?

• Do I believe my rollover equity create meaningful additional value?

  
  

For DSOs, structure directly affects alignment, retention, and long-term platform growth. In today’s dental M&A market, deal structure is not secondary to valuation. It is central to how value is created, preserved, or transferred over time. Reach out to our team to navigate your deal.