Section 6: Succession & Leadership Continuity

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Succession is one of the quietest but most destabilizing risks inside a growing DSO. Operators usually focus on acquisitions, integrations, systems and EBITDA uplift, yet very few build a clear plan for leadership longevity.  

A recent survey from the National Library of Medicine found that frequent CEO turnover in healthcare leads to financial performance drop and higher risk of organizational instability [37]. 

As groups expand, they start depending heavily on a small circle of senior operators, lead clinicians and regional managers. When even one of these people leaves, growth slows, KPIs drift and cultural consistency begins to weaken. The real issue is the lack of a strong bench of leaders who can step in without disruption. 

There is also a generational challenge at play. Many clinicians who hold leadership roles have never been trained to run large multi-site operations or manage commercial responsibilities at scale. They carry valuable institutional knowledge, but the next phase of expansion often requires a different skill set.  

Investor expectations add another layer of pressure. A weak succession plan leads to inconsistent performance, quality compliance issues, and a loss of buyer confidence. In contrast, DSOs that invest early in leadership continuity can protect EBITDA, preserve clinical and operational standards, and keep teams aligned through periods of change. 

This section addresses the core issue that succession is not something to consider only when a leader resigns. DSOs that treat leadership continuity as a core operating pillar scale with fewer interruptions will create stronger enterprise value.  

Why Succession Planning Defines True Scalability

Scaling a DSO is not just about acquiring clinics or improving operational processes. It is about ensuring that the organization can continue performing even when key people step away. Most groups underestimate this risk.  

In fact, report by the American College of Healthcare Executives (ACHE) found just 21% healthcare institutions have formal succession plans [37]. 

They grow quickly around a charismatic founder or a small group of senior clinicians, but they fail to build a leadership structure that remains stable when those individuals reduce clinical time, move into strategic roles, or exit entirely. 

The truth is that investors want to see more than good numbers. A DSO that relies on a single clinical leader or founder will always look fragile. A group with distributed leadership, documented processes, and groomed successors looks durable. That difference creates real separation in EBITDA multiples, lender confidence, and buyer appetite. 

1. How Founder Reliance Weakens Valuation

Founders often carry the weight of culture, operations, and financial discipline. Buyers see this as a concentration risk.  

The objective in any DSO transition is to prove that systems, teams, and governance drive performance, not personalities. This reassures investors that earnings will hold even if the founder retires, reduces clinical time, or steps back after the transaction. 

A well-designed succession system removes that dependency. When leadership is spread across regional managers, clinical directors, and operational teams with defined responsibilities, buyers see stability.  

When future leaders are already trained and equipped, the business looks prepared for growth. This directly improves EBITDA certainty and protects value during exit negotiations. 

Build leadership redundancy 

A DSO should not rely on a single individual for clinical oversight, operational decision making, or problem solving. Creating a layer of regional or cluster leaders distributes accountability and makes the organization resilient during transitions. Buyers place a premium on groups where leadership continuity is already built into the structure. 

Document the founder’s decision blueprint 

Founders often carry operational knowledge in their heads. Mapping how they make decisions, prioritize resources, and manage performance helps turn individual habits into organizational processes. This strengthens governance and reduces the perceived risk of losing institutional knowledge during an exit. 

Develop internal successor pipelines 

Identifying future leaders early creates confidence that the organization will have capable managers ready to step up. Succession pipelines should include lead dentists, practice managers, and regional heads who can take operational or strategic responsibility. Investors understand that a trained bench protects EBITDA far better than last-minute hiring. 

Reduce clinical dependency on founders 

If founders still generate a large share of revenue, it signals fragility. Introducing strong clinical teams, associate development programs, and multi-clinic talent deployment reduces that single-clinician reliance. Buyers want to see predictable revenue that is not tied to one high-earning provider. 

Strengthen governance structures 

A DSO with clear reporting lines and defined leadership roles looks far more stable than one that revolves around the founder’s direct involvement. Strong governance signals maturity and lowers the risk of disruption during leadership changes. This directly improves valuation multiples. 

Ensure continuity through role transitions 

Successful DSOs plan for the founder to step back gradually, with overlapping responsibilities and shadowing periods. This reduces operational disruption and helps new leaders take responsibility with clarity. Buyers view structured transitions as a sign that EBITDA performance will remain stable post-deal. 

Using a Global Capability Center to Strengthen Succession and Scalability

A DSO can only scale sustainably when it builds depth behind its frontline and executive teams. Most groups grow by adding sites, services, and revenue, but their internal capacity does not grow at the same pace.  

This creates a structural reliance on a few senior people who carry institutional knowledge, decision authority, and operational control. When these individuals move on, retire, or step back, the business becomes exposed. 

A future-proof succession planning requires a model that spreads capability, builds second-line leadership, and protects continuity during transition. DSOs that fail to build this depth eventually hit a ceiling because they do not have enough operational bandwidth to support further growth or integration. 

A Global Capability Center (GCC) business model provides a practical and scalable way to build this depth early. It creates a dedicated team that owns core business functions, maintains institutional memory, and supports the leadership layer through reliable operational, financial, and commercial capability. By shifting critical knowledge and process management into a GCC, the DSO reduces its dependence on a few key people. This strengthens succession planning, stabilizes performance, and enables the group to scale without disruption to EBITDA or patient experience. 

1. How a GCC Reduces Dependence on Founders and Builds a Durable Second Line

Many DSOs grow quickly in their early years because the founders carry the operational load, make key decisions, and hold most of the institutional knowledge. This works during the start-up and expansion phase, but it becomes a barrier to scale.  

A Global Capability Center gives the DSO a way to shift this dependence from individuals to a system. Research from ANSR reveals, India houses over 55 healthcare and life sciences companies operate more than 95 Global Capability Centers in the country, employing over 300,000 professionals [38].  

For DSOs, a GCC will help create a stable team that manages the repeatable work, owning core processes and maintaining continuity even when senior leaders change roles.  

This supports stronger succession planning and gives the DSO a more durable second line that protects EBITDA as the business expands. 

Clear Process Ownership 

A GCC documents and runs core workflows in finance, compliance, HR, reporting, and operational support. These functions no longer rely on founder-led oversight. When the processes sit with a trained offshore team, the DSO maintains consistency even during clinical or leadership turnover. 

Institutional Knowledge Hub 

The GCC becomes the central memory of the organization. It tracks data, maintains historical records, and supports decision-making with accurate information. This reduces the risk of losing critical knowledge when a founder or senior manager steps back. 

Scalable Decision Support 

The GCC provides reliable reporting, analytics, and operational insights. Leaders across the DSO can make informed decisions without relying on a few senior people who previously controlled the flow of information. This spreads capability across the organization. 

Continuity During Transitions 

When a founder retires or a senior leader exits, the GCC keeps the operational engine running. It preserves performance levels, supports clinics, and prevents disruptions that normally affect revenue or clinical output. This improves buyer confidence and strengthens valuation during an exit. 

2. How a GCC Helps Create a Continuous Operating Backbone

Most DSOs struggle to scale because each new clinic adds operational pressure. Systems start to stretch, reporting slows down, and teams get pulled into firefighting instead of planning. When operations are fragmented, the organization grows in size but not in capability.  

A GCC solves this by creating a stable operating backbone that grows with the DSO. It centralizes the functions that must run the same way every day and ensures that quality does not decline as the number of clinics increases. 

In fact, Industry benchmarking from PwC shows that organizations typically realize operating cost savings between 10 to 30% after moving transactional and back-office work into shared services [39]. 

With this backbone in place, the DSO can add practices without increasing internal strain or diluting performance. This improves scalability and creates a more attractive business for investors. 

Standardized Core Operations 

The GCC ensures that key functions such as finance, compliance, HR support, and reporting run uniformly across all clinics. Standardization removes inconsistencies and prevents operational drift. This gives the DSO a stable base that makes expansion smoother and more predictable. 

Faster Clinic Onboarding 

New acquisitions often slow down because internal teams cannot absorb the additional workload. A GCC handles data migration, documentation, credentialing support, and financial integration. This shortens onboarding timelines and accelerates revenue stabilization for newly acquired clinics. 

Continuous Performance Monitoring 

The GCC provides real-time reporting and analytics across all locations. It identifies early operational issues before they affect revenue or patient experience. This supports faster interventions and improves EBITDA through better operational control. 

Reduced Load on Local Teams 

Front-line teams often absorb administrative tasks when the organization grows. A GCC takes over recurring back-office work so clinic staff can focus on clinical output and patient experience. Higher clinical productivity directly contributes to stronger financial performance. 

Scalable Support Infrastructure 

As the DSO expands, the GCC expands in parallel. It adds capacity systematically in finance, operations support, and data functions without increasing the cost base at the same rate. This allows the organization to scale without proportional headcount increases in high-cost markets. 

Lower Overheads and Higher EBITDA 

By shifting repeatable operational work to the GCC, the DSO avoids the rising labor costs that usually accompany scale. This protects margins and increases EBITDA because the organization grows without proportionate increases in salary and overhead expenses. 

Leadership Incentivization, Retention, and Earn-Outs

Sustaining senior leadership through a transition phase is one of the most critical levers for DSO value creation. A well-aligned leadership team protects operational continuity, maintains clinical quality, and drives EBITDA growth during the hold period.  

Without the right incentives, DSOs risk disengagement, talent loss, and inconsistent performance across sites. 

This section outlines how long-term incentives and structured earn-outs can stabilize leadership behavior. The focus is on practical mechanisms that create alignment between founders, clinical leaders, and investors. This can be achieved by ensuring that everyone is moving toward the same exit objective while protecting performance standards and achieving predictable financial outcomes. 

1. Align long-term incentives with exit objectives

Long-term incentive structures work only when they create behavioral alignment.  

In a DSO, clinical directors, non-clinical leaders, and regional managers need to feel invested in the group’s success beyond their salary. When incentives reflect the same exit metrics that matter to investors, you generate consistent decision-making across the organization. 

The focus here is on instruments that link leadership effort to measurable EBITDA outcomes. This improves accountability, supports group-wide standardization, and reduces performance volatility. When structured correctly, these incentives can reduce turnover, maintain quality, and strengthen integration across acquired practices. 

Key Components 

Equity participation clarity 
Grant real equity or options that vest based on EBITDA growth and time. This helps senior leaders think like shareholders and prioritize actions that improve operating margins and practice profitability. 

Phantom equity for non-clinical leaders 
Offer phantom equity units that track valuation without diluting ownership. This is effective for regional managers, finance leads, and operations heads, as it links their reward to group-level EBITDA improvement. 

Deferred bonuses linked to KPIs 
Tie deferred compensation to measurable KPIs such as same-store revenue growth, clinician productivity improvement, and operational cost control. This ensures performance is consistent throughout the transition period. 

Vesting aligned to exit timeline 
Design vesting schedules that mirror the planned exit window. This supports continuity, reduces leadership churn, and protects the buyer’s confidence during diligence and negotiation. 

Retention triggers during integration 
Include retention rewards that activate after key integration milestones. This strengthens internal alignment, accelerates standardized processes, and ensures smoother adoption of clinical protocols. 

Performance governance framework 
Set up regular performance reviews that link incentive progress to operational data. This introduces discipline, ensures transparency, and reduces disputes around payout calculations. 

2. How to use earn-outs strategically

Earn-outs are often misunderstood as tools for negotiation pressure. In a DSO, their value is operational. A well-designed earn-out keeps founders, senior clinicians, and regional leads fully invested in the immediate post-sale period.  

This protects revenue continuity, stabilizes clinician output, and ensures that practice-level performance does not drop once the deal closes. For investors, this period is where most integration risks exist, so the earn-out becomes a practical method to keep behavior aligned with the group’s financial expectations. 

Recent deal data shows that about 26% of private-company acquisitions in 2023 used earn-outs, with usage generally falling between 20-28% over previous years. This confirms that earn-outs are a standard feature in a meaningful share of transactions [40].  

It supports consistent patient flow, clinician retention, and reliable reporting. This allows the DSO to maintain stable margins, protect patient experience standards, and preserve referral relationships that underpin revenue. Predictable performance in this phase reduces volatility in consolidated accounts and builds confidence ahead of the planned exit. 

Key Components 

Clear EBITDA-linked milestones 
Set transparent EBITDA and revenue milestones that determine payout. This protects the buyer while rewarding the seller for sustained financial performance during the transition. 

Defined time-bound structure 
Limit earn-outs to a clear and manageable duration. This maintains motivation, reduces disputes, and ensures that leadership stays engaged without creating long-term dependency. 

Operational responsibility alignment 
Give sellers clear responsibility for the metrics they influence. This avoids unrealistic targets, keeps expectations fair, and improves collaboration with incoming management teams. 

Clinical performance safeguards 
Combine financial metrics with clinical quality indicators. This ensures EBITDA growth does not compromise patient care or compliance standards. 

Integration support incentives 
Reward proactive participation in integration activities such as adopting group-wide systems, centralizing procurement, and aligning reporting. This accelerates standardization and boosts margins. 

Dispute avoidance through structured governance 
Create clear governance around how earn-out results are calculated. This includes defined reporting methods, timelines, and review processes, which help avoid conflict and ensure predictable payouts. 

Preparing the Organization for Transition

Preparing a DSO for transition demands more than a clean balance sheet and a strong set of financials. A buyer assesses whether the group can deliver consistent EBITDA once ownership changes.  

 When an organization relies heavily on founder-driven decision-making or informal operational knowledge, the risk profile increases for any incoming buyer. The uncertainty around who will run the clinics, sustain clinical standards, and drive performance after the transaction directly influences valuation and deal structure. 

Studies show that 47% of senior managers in an acquired company exit within the first year when there is no structured retention or transition plan, and up to 72% leave within three years [40]. This is what transition risk is all about. 

For DSOs, it reinforces the need to prepare a clear leadership bench early, because investors consistently pay more for assets where future management is stable, accountable, and able to protect EBITDA through the transition phase. 

1. Cultivating a visible next-generation leadership

A DSO that relies heavily on its founders is always viewed as a higher risk asset. Investors want clarity on who will actually run the group once the sale closes.  

A documented and visible second line gives confidence that EBITDA delivery will remain steady. Buyers value evidence that operational and clinical decisions do not stall when founders reduce involvement. 

Building this leadership tier requires a structured approach. It is not enough to have capable people in the background. They must be visible, competent, data aware, and already managing significant responsibilities.  

This reassures investors that the business can protect its growth trajectory without relying on one or two key individuals. 

Defined succession paths 
Create clear succession plans for each major function. This includes operations, finance, HR, and clinical governance. When roles and responsibilities are mapped, buyers see that leadership continuity is part of the organizational design. It also limits disruptions during due diligence, where rapid decision making is essential. 

Structured capability development 
Invest in capability building through leadership training, exposure to financial reporting, and operational coaching. Buyers want a team that understands performance metrics such as chair utilization, gross profit per clinic, clinician productivity, and overhead ratios. Strengthening these skills ensures leaders can respond effectively to performance challenges. 

Delegation of operational control 
Shift operational decision making to the next generation leaders at least twelve to eighteen months before the transition. This proves that practice level performance, recruitment, scheduling, and compliance can run smoothly without founder involvement. It also helps reduce founder fatigue during the sale process. 

Visibility to investors and buyers 
Create opportunities for the leadership team to engage directly with investors during diligence. This includes deep dive sessions on operations, performance, clinical quality, and compliance. When buyers see aligned and competent leaders, confidence increases and negotiation friction reduces. 

Clinical leadership depth 
Develop a strong layer of clinical directors, lead associates, and quality heads who manage performance standards across clinics. This protects clinical consistency, reduces the risk of clinician turnover, and maintains predictable patient flow. Strong clinical governance is a key driver of valuation and EBITDA stability in a DSO. 

Retention planning for key roles 
Build structured retention agreements for crucial leaders such as regional heads, finance controllers, and clinical directors. Buyers seek assurance that these individuals will stay through the transition. Well-designed retention reduces performance volatility and improves integration success. 

2. Communication planning: how to signal continuity to staff, clinicians, and patients

Communication during a transition shapes how people respond. Unclear messaging leads to staff turnover, clinician anxiety, and patient uncertainty. This directly affects revenue, utilization rates, and operational efficiency. A structured communication plan ensures the organization remains stable and productive throughout the transition period. 

A disciplined communication approach protects the culture, maintains trust, and prevents speculation. Staff want to know that their roles and working environment remain stable. Clinicians need clarity on autonomy, pay, and clinical protocols.  

Patients need reassurance that care quality will not change. When communication is consistent and well timed, the DSO maintains performance and avoids operational dips that can harm EBITDA. 

Internal information roadmap 
Plan a clear timeline for internal communication, starting with senior leaders, then practice managers, followed by broader staff teams. A staged approach prevents rumours and ensures messages reach the right people at the right time. This limits anxiety and preserves productivity. 

Clear explanation of continuity 
Communicate which parts of the business will remain the same. This includes clinical protocols, patient experience standards, pricing policies, and employment terms. Clarity on continuity helps stabilize the workforce and maintains consistent performance across clinics. 

Practice level alignment 
Equip practice managers with detailed guidance and prepared responses to common questions. This ensures accurate and consistent communication across all clinics. Effective practice level messaging reduces uncertainty among reception teams, dental nurses, and associates. 

Patient facing messaging 
Prepare simple and reassuring messages for patients. These can be delivered at reception, through email reminders, or during chairside interactions. When patients are confident that nothing is changing in their care journey, they maintain their appointments and treatment plans. 

Clinician engagement sessions 
Conduct focused sessions with clinicians to address concerns about autonomy, workflow, and clinical governance. Clinicians want to know that their working style and patient decision making remain respected. Strong engagement reduces clinician turnover, which is a significant risk to EBITDA. 

Coordination with buyer teams 
Align communication with the incoming investor once confidentiality allows. Both sides must convey consistent information to staff and clinicians. Mixed messages create confusion and reduce trust. Coordinated communication protects culture and ensures smoother integration after completion.