Dental practice management. There has also been great growth in dental practice management during the last couple decades. In the past decade alone, more than 25 private equity firms invested significantly in dental practice management, and some large companies in the sector have seen annual revenue of more than $100 million. This has evolved to the point where there are at least 10 large-scale dental practice management companies. In early July, Dental Care Alliance, one of the largest DPM companies in the U.S., was sold to New York private equity firm Harvest Partners, LP.
This is an area that serves either commercial or private pay interest, as well some companies that are heavily focused on Medicaid. At the same time, there has been an increase in scrutiny in the dental practice management area. In 2013, a Senate committee investigation into DPM practices in the Medicaid program concluded that some practices should be excluded from the program.
According to Moody’s and other industry sources, a number of private equity-backed consolidators could be poised for initial public offerings this year. Industry sources point to two major IPO prospects in the next few years. One is Smile Brands Group Inc., an Irvine, Calif-based operator of general dental and orthodontic practices that is backed by New York PE firm Welsh, Carson, Anderson & Stowe. The other is Ontario Teachers’ Pension Plan-backed Heartland Dental Care Inc., which was acquired in a 2012 auction featuring the likes of Kohlberg Kravis Roberts & Co. LP, Apax Partners, LLP and Madison Dearborn Partners, LLC.
According to Geoffrey Cockrell, chairman of the private equity group at McGuire Woods law firm, “the dental market continues to be active despite a downturn of activity due to the underlying fact that it remains a very fragmented industry (the majority of practices are independent). Now, practices and private equity investors are looking for new business models and more elaborate ownership structures. Larger chains are trying to tie in specialty entities to their current systems.”