Kyle Welch on Why DSO Operators Are Being Blamed for a Problem They Didn't Create

Why DSO Operators Are Being Blamed for a Problem They Didn't Create Why has the DSO deal market stalled even as demand for dental care remains strong? In this episode of The Dental Economist Show, host Mike Huffaker speaks with Kyle Welch, Associate Professor of Accountancy at the George Washington University School of Business, about the capital-market forces shaping private equity, DSO valuations, and the path to liquidity for dental entrepreneurs. Kyle explains his central thesis: the current slowdown is not simply an operator-performance issue or a reflection of what is happening in the dental chair. It begins higher up the chain with how private equity is valued, how institutional investors allocate capital, and how rising rates have changed the economics behind acquisitions and exits. Drawing on his experience at the Stanford University endowment and his research into private equity reporting, Kyle explores why private-market valuations can appear smoother than public markets, why secondary-market discounts matter, and why the capital that once fueled DSO consolidation has become more constrained. The conversation also examines what comes next. Kyle and Mike discuss the pressure created by extended hold periods, the importance of retaining doctor partners, refinancing and debt restructuring, and why combining platforms and pursuing public-market liquidity may offer a more durable path forward for some dental organizations. Episode chapters 00:00 The capital-markets problem behind the DSO slowdown 02:09 Kyle’s path from institutional investing to academia 03:32 Why private equity’s challenges matter to dentistry 06:49 The accounting “smoothing” effect in private equity 12:36 Secondary markets and the gap between reported and market value 15:13 Why this is a private-equity issue—not just a dental issue 20:00 Capital constraints, dry powder, and the liquidity freeze 26:50 The two priorities for DSOs: debt coverage and doctor retention 33:19 Restructuring debt and working with lenders 39:56 A potential path forward: consolidation and public-market exits Connect with the team: 👉 Mike Huffaker on LinkedIn: https://www.linkedin.com/in/huffaker/ 👉 Planet DDS: https://planetdds.com/ 👉 Kyle Welch on LinkedIn: https://www.linkedin.com/in/ktwelch/ You can also listen to our podcast here: 👉 Apple Podcast: https://shorturl.at/ikORx 👉 Spotify: https://shorturl.at/SMInC Want to be a guest on The Dental Economist Show? If you’re a growth-focused leader in the dental business world or someone shaping its future through technology, consulting, or innovation, we’d love to hear from you. Whether you’re leading a DSO, building the next generation of dental technology, or helping redefine patient care, The Dental Economist Show is where the industry’s leading voices come together to discuss what’s next.