Dental support organizations (DSOs) have for decades drawn big checks from private equity, and now investment in the technology to directly support dentists is following.

Why it matters: Running dental clinics more efficiently is increasingly important amid today’s labor shortages and war for talent.

• DSO consolidators typically achieve synergies through a traditional buy-and-build strategy, but investing in technology can enhance value while also helping recruit dentists.

Driving the news: Bregal Sagemount's majority investment in DentalXChange, which partner Blair Greenberg calls the “connective tissue between dentists and payers."

• DentalXChange is an electronic data interchange (EDI) platform that lets dentists electronically submit claims to payers.
• It also helps dental insurers ingest claims.
• DentalXChange is unique as a pure-play dental EDI, but broader platforms like Jordan Co.’s Vyne and Change Healthcare have offerings in this niche.

Yes, and: DentalXChange is just “scratching the surface," Greenberg says, with a bigger opportunity to take data and help DSOs understand their claims and individual practice performance.

• “This piece that we provide today is the fabric of the claims space but there’s a lot more that we can do with it,” Greenberg tells Sarah.
• DentalXChange also fits with Bregal Sagemount’s focus on recurring segments largely uncorrelated to the macro environment: “Sectors that have low volatility and are increasingly adopting tech — that’s exactly what we try to find every day,” the investor adds.

State of play: Dental tech could be about to undergo a significant period of investment as a proliferation of new companies gain traction.

• A Healthcare Growth Partners report states that deal-making is picking up across four dental health IT segments: patient engagement and marketing, data-driven care, practice management solutions and payer tech and benefits.
• Practice management has seen the most activity, HGP says, highlighting Henry Schein’s eAssist acquisition and Level Equity’s Planet DDS investment.
• In recent deals of note, General Catalyst and Insight Partners in August led a $27 million Series A financing in Overjet, which uses AI to automate parts of the clinical review process.

The bottom line: New technology and automation tools are driving a much-needed cleaning of the dental industry.