Consolidation of the European dental industry is in its early stages
Despite the growing liberalization of healthcare markets, the dental sector in Western Europe remains highly fragmented and presents a significant investment opportunity for private equity firms and strategic buyers from adjacent healthcare sectors. Consolidation and the creation of dental chains can bring significant operational and procurement efficiencies, as long as local market differences and customs are respected.
In addition to stable or growing demand in most parts of the region, investors are attracted by the possibility of achieving scale economies through shared services, a shared talent pool and the option to vertically integrate into laboratories and other services.
But in building a pan-European operating model, chains should be wary of becoming faceless corporate organizations that lose the personal touch that is so important to patients. A strong local management team and brand can maintain customer intimacy and enhanced dental care, and adapt to specific country regulations, with a focus on long-term profitability over quick wins.
This paper presents insights from a KPMG survey of more than 100 dental experts from the Netherlands, Germany, UK, Sweden, Denmark, Italy and Finland, informed by our project experience in this space. We look at the current market and discuss how to create an effective and sustainable, branded chain that meets local needs and has the potential to grow nationally and cross-border.
High potential in a fragmented market
Following the introduction of partial free market activity in healthcare over the past decade or so, a number of governments across Western Europe are aiming to counter the dual challenge of rising demand and budgetary restrictions, by stimulating higher levels of efficiency and quality. Although this liberalization has helped drive increased merger and acquisition activity in other healthcare industries like hospitals, care centers and private clinics, consolidation in the dental care industry remains relatively low. Yet the size of the Western European dental sector (estimated at more than US$70 billion) and high levels of fragmentation, suggest an industry ripe for consolidation.
To better understand the scale and nature of this investment opportunity, in late 2016 KPMG surveyed more than 100 dental experts from the Netherlands, Germany, UK, Sweden, Denmark, Italy and Finland. Our research involved structured telephone interviews with dentists, practice owners, heads of dental associations and healthcare insurers and, together with our project experience in this space, has informed the basis of this article.
