Table of contents
Key takeaways
The European dental care landscape comprises businesses and public organisations that provide various oral care treatments. Such medical care includes preventive, remedial, restorative, emergency and cosmetic procedures. This research focuses on European businesses that operate multiple dental clinics under one or multiple brands. We segmented the market by geographic scope into: (i) international and (ii) domestic.
The European dental care market remains highly fragmented, with the penetration of dental chains varying significantly among countries. To illustrate, Germany positions itself on the lower end of the spectrum with ~5% of chain penetration, whereas the UK houses several acquisitive consolidators with >30% chain penetration. Overall, the industry remains poised for consolidation given the abundance of attractive acquisition targets and changing regulations opening previously restricted markets to external capital.
Sponsor-led interest has been significant, with ~75% of identified assets being backed by a financial sponsor (November 2022). Investors are attracted to the stable underlying demand for dental care and vast opportunities for value creation through buy-and-build, ranging from multiple arbitrage plays to operational improvements and service expansion. Following a slowdown during COVID-19, deal activity rebounded with clinics valued at ~10-15x EBITDA as of early 2021.
ESG topics primarily relate to social and governance issues. The structural shortage of new dental graduates paired with a wave of workforce retirements poses large operational threats to (especially smaller) chain operators. On the governance front, market consolidators face increased risks of managerial misconduct, potentially leading to significant legal and reputational damages (e.g. tax fraud at Vitaldent & PlusTerveys).
Company benchmarking
Market growth
The European dental care industry was valued at ~€70bn in 2017 (Healthcare Business International, September 2017). KPMG (June 2020) estimated that the industry grew ~2-4% per year in 2017-2019
According to Eurostat (August 2022), there were ~340k practising dentists in the EU in 2020, up from ~325k in 2016 (~360k including the UK), equivalent to a CAGR of ~1.1%
Technavio (September 2021) valued the global invisible orthodontics market at ~$3.4bn in 2020 and projected it to grow at a ~10.5% CAGR to reach ~$5.5bn by 2025
Positive drivers
Favourable demographic dynamics, with the expectation that citizens aged over 65 will represent ~30% of the EU population by 2050 (+10pp vs. 2020; JAMA Network, August 2020). From a dentistry perspective, these patients require more remedial and restorative care procedures (Clearwater International, January 2021), which generate better margins than preventive treatments (interview by Gain.pro)
Growing demand for cosmetic dentistry procedures. In particular, the proliferation of social media is leading to higher body dissatisfaction rates among adults, thereby also providing a more effective marketing channel for dental clinics to target potential cosmetic clients (Clearwater International, January 2021)
Dental care digitalisation will allow identified clinics to improve margins and revenue visibility. Specifically, the adoption of teledentistry and smart oral care devices can extend patient interaction beyond occasional visits (KPMG, June 2020), while clinical and administration software could further optimise cost structures (GFDI, January 2019)
Negative drivers
Increasing inflationary pressure on operating margins. An industry executive (interview by Gain.pro) highlights the wage increases necessary to hire and retain skilled staff affected by structural shortages, while at the same time lab and utility expenses are projected to rise ahead of general inflation (Dental News, August 2022)
Headwinds from changing consumer behaviour. EU sugar consumption is projected to decline by ~5% from 2020-2029 (Statista, April 2022), while daily smoking rates among OECD countries already declined to ~16.5% in 2019 (-4.8pp vs. 2009; OECD, November 2021). Both factors are expected to improve general dental health, thereby reducing demand for respective treatments
Evolving oral care products limit the total addressable market for traditional clinics. As many individuals bear negative perceptions of dental clinics (Dentistry, April 2022), they attempt to substitute conventional dental treatments with at-home alternatives. As such, US-based telehealth company SmileDirectClub saw its revenue grow from ~$140m in 2017 to ~$638m in 2021 (SmileDirectClub, February 2022)
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Dental chains industry.
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