Dealmakers in the DSO space entered 2026 with real optimism, but market activity so far suggests something closer to a second straight year of “muted recovery.” Nearly 75 DSO sale processes were abandoned from June 2022 through the end of 2025, while only about 8 transactions closed at modest multiples. Early this year, lower interest rates, an overdue wave of sponsor recapitalizations, and sellers adjusting their price expectations pointed toward a material rebound, though one well short of the 2021 highs.

The conditions for recovery have yet to line up, as interest rates are unlikely to budge until conflicts in the Middle East and Ukraine ease and oil prices settle. Activity remains steady but modest, with reported transactions spanning roughly 175 practice locations in the first five months of the year.

Sellers are resetting expectations to reflect current conditions, and buyers are mitigating the risk through earnouts, holdbacks, post-closing purchase price true-ups, and joint ventures, leading to a rise in small and mid-size acquisitions. Many DSOs are also still restructuring debt, lowering overhead, and implementing new technology, work expected to continue through 2026 and 2027. Diagnostic AI and revenue cycle management are the most common solutions in use, and the lessons so far are consistent: standardize systems, integrate with the practice management system, plan the implementation carefully, and separate real value from “shiny objects.”

The outlook for the rest of the year, while optimistic, is far from certain. Technology investments should begin to show measurable returns by year-end, including lower overhead and higher EBITDA for many DSOs, but any significant uptick in M&A will hinge on rate cuts. Targets that differentiate on culture, specialty integration, and tech capabilities stand to increase their enterprise value well beyond those that do not. The question for many organizations isn’t whether the capital returns, but whether they will be positioned to capitalize on it when it does.