Except, that equality does NOT hold! The sqrt "function" has two branches. sqrt(x^2) can as easily be -x, as it is x. So you cannot simply replace sqrt(x^2) with x.
expression = ((2*A*dhmax + B*h0)^2/h0^2)^(1/2)
expression =

simplify(expression)
ans =

As you can see, simplify refuses to do what you think is obvious. However, if you want, you can effectively tell simplify to play a little fast with the rules, to not be quite so picky.
simplify(expression,IgnoreAnalyticConstraints = true)
ans =
