Boston’s Berkshire Partners is exploring a sale of Affordable Care that could value the country’s largest dental support organization focused on tooth replacement at more than $2 billion, according to four people familiar with the firm’s plans.
The Morrisville, North Carolina, company has held pre-process fireside chats with financial sponsors, with first round bids for the company coming up this month, some of the people said. Jefferies has been engaged for sell-side financial advice, sources said.
Global buyout firm Partners Group is a minority investor in Affordable Care through its debt platform. Majority investor Berkshire Partners, one person added, may roll a minority stake.
Affordable is marketing $160 million in EBITDA for the LTM period ended June 2021, with the process targeting a mid-teens EBITDA multiple around 14x to 15x, some of the people said. Applying the $160 million, that would suggest a deal could be valued into the low $2 billion range.
Affordable Care provides various non-clinical services – ranging from marketing and business services to continued education – serving affiliated dentists at more than 350 practices in 41 US states. Affordable Care serves two major dental brands, Affordable Dentures & Implants and DDS Dentures + Implant Solutions, the latter being acquired in March 2019.
Affordable Care practices provide dentures, partial dentures and tooth extractions, and many offer implant-supported dentures and single tooth implants. Every practice has an on-site dental laboratory, allowing the practice to provide same-day dental services.
Serving a large and growing market, around 90 percent of individuals missing teeth receive care today, with at least 95 percent of those solutions falling in the dentures and overdentures category, one source said.
Dentures are more affordable, but are a bigger impediment to chewing, plus wears bones down more easily and are less comfortable when compared with implants. For those who can afford it, there’s a growing market for fixed, full-arch implants that are both more natural appearing and feeling, the source said.
Resultantly, Affordable Care under its current backers has successfully made moves to diversify beyond its legacy dentures focus and into more implant services, sources said. The DDS acquisition helped fuel this migration, with the company growing very well now and positioned for further M&A under its next owner, some of the people said. An additional growth vector might be orthodontics, one person added.
Affordable Care has also brought in several new C-suite members, with Gene Kirtser taking the CEO post in 2017. Kirtser most recently was the CEO at ROi, a leading healthcare supply chain company, and held prior roles at Baxter/Allegiance/Cardinal, ChoicePoint Health Systems, Maxxim Medical, and SRI Surgical.
Berkshire Partners’ investment dates to October 2015, when it bought the company in a leveraged buyout alongside Partners Group. The latter through its debt business invested over $200 million in the form of both debt and equity, according to an announcement at the time. The LBO was valued at $825 million, according to Pitchbook, providing an exit for American Capital.
In relevant activity, Sun Capital Partners last year sold ClearChoice Management Services to dental support giant Aspen Dental Management, which is owned by an investor group that includes Ares Management, Leonard Green & Partners and American Securities.
For Aspen, the deal offered a means to gain access to centers offering specialized implant capabilities not offered at a traditional dentist office. ClearChoice, which saw significant growth under Sun, operates a largely direct-to-consumer model, providing non-clinical support services for centers focused on fixed dental restorations (and not dentures) for patients with missing or failing dentition.
Commanding a more than $1.1 billion valuation, PE Hub previously wrote, the deal implied a trailing 12 month EBITDA multiple of 12x-plus.
Berkshire Partners and Affordable Care did not return PE Hub’s requests for comment. Partners Group and Jefferies declined to comment.
Correction: This report correctly identifies Partners Group as a global buyout firm. A previous version identified the firm as Swedish.