Short answer: a DSO deal is rarely a simple all-cash sale. Most involve a mix — cash at closing, retained equity (“rollover”) in the larger group, an ongoing employment agreement, and sometimes an earnout. That retained equity is the heart of the pitch: the promise of a “second bite of the apple” when the DSO itself is later sold. Understanding the structure is how you value the offer.
Why isn’t a DSO deal just a price?
Because DSOs are usually building value to sell the whole group later, they want you invested in that outcome — not just cashed out. So the typical deal combines several pieces, each with different certainty and risk. The advertised “total value” often blends guaranteed cash with contingent and future components.
The common building blocks
| Component | What it is |
|---|---|
| Cash at close | The guaranteed money you receive up front |
| Rollover equity | Ownership you keep in the DSO/holdco (the “second bite”) |
| Employment agreement | You keep working, usually for a set term and comp model |
| Earnout | Extra payout tied to hitting future performance targets |
| Joint venture (JV) | You and the DSO co-own the practice or a regional entity |
What is “rollover equity” and the second bite?
Instead of taking all cash, you “roll” part of your proceeds into ownership of the larger DSO. The pitch: when the DSO is sold again in a few years (often to a bigger PE buyer), your equity could be worth a multiple of what you rolled — a “second bite of the apple.” It’s potentially lucrative, but it’s a real investment with real risk: it’s illiquid, its value depends on the DSO’s success, and it could be worth less than promised — or more.
What about the employment agreement?
Most DSO deals require you to keep practicing for a period, at a defined compensation — often lower than your prior owner income. That post-sale comp is part of the real economics: a strong sale price paired with years of reduced pay may net less than it first appears. Read the employment terms as carefully as the price.
How do you evaluate all this?
Model the after-tax value of each component separately — guaranteed cash, the risk-adjusted value of rollover equity, the earnout’s probability, and the employment income — then compare it to the alternative of holding your practice. This is complex, deal-specific analysis; our role is to help you evaluate the offer and how it fits your overall plan, alongside your CPA and attorney.
Frequently asked questions
Most DSO buyouts combine cash at closing, retained “rollover” equity in the larger group, and an employment agreement to keep you practicing, sometimes with an earnout tied to future performance. The rollover equity is a bet on the DSO’s eventual sale — the “second bite of the apple.” The mix of guaranteed versus contingent value is what determines the real worth of a deal.
It’s the portion of your proceeds you keep as ownership in the DSO instead of taking as cash. If the DSO is later sold at a higher value, that equity can be worth a multiple of what you rolled — but it’s illiquid, risky, and dependent on the DSO’s performance. It should be valued as an investment, not counted like guaranteed cash.
Sources
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist and hosts the Smiles & Cents podcast.
Keep reading
- Hold vs. sell to a DSO: could keeping your practice earn you more?Selling to a DSO is a big check today; holding your practice keeps years of profit plus a future sale. A framework for comparing the two honestly.
- Types of DSOs, explainedNot all DSOs are alike — from large corporate groups to “invisible” affiliation models and dentist-led groups. How the types differ on autonomy and structure.
- How to evaluate a DSO or private-equity offerA framework for dentists weighing a DSO or private-equity offer — understanding deal structure, after-tax proceeds, and life after a sale.