H.I.G.’s InterDent takes another stab at a sale

  • H.I.G. bought InterDent in 2012 from Levine Leichtman
  • Harris Williams ran previous auction for DSO in 2015
  • Western-focused company has big Oregon Medicaid business

H.I.G. Capital’s newly led InterDent, which offers dental-practice support services in much of the western U.S., is making a return to the auction block, Buyouts has learned.

Moelis has been hired to run a sales process for the company, according to four sources, who spoke on the condition of anonymity. The process remains in its early stages and will be targeted exclusively at financial buyers, one of the sources said.

InterDent, Inglewood, Calif., generates Ebitda of around $45 million, sources said.

H.I.G. has owned InterDent since August 2012, when through a secondary buyout it purchased the company from Levine Leichtman Capital Partners. LLCP purchased InterDent in December 2004 out of bankruptcy.

The Miami financial sponsor called off a sales process for Interdent in late 2015 due to a disconnect over valuation, sources said. InterDent at the time was hoping to get credit for some add-on acquisitions that hadn’t been fully integrated, and a large percentage of its earnings base was attributable to add-backs, they explained.

The seller’s valuation expectations in 2015 were based on an adjusted Ebitda value as high as about $50 million, whereas potential buyers were willing to value a deal based on Ebitda closer to $30 million, sources said at the time.

One potential challenge in the process could be the company’s large Medicaid program in Oregon, two of the sources noted. While its Oregon business is highly profitable, the state has been dealing with significant Medicaid payment problems.

One source estimated the Oregon business accounts for some 60 percent of InterDent’s Ebitda and just 35 to 40 percent of its top line.

Interestingly, InterDent’s Oregon Medicaid business did field some looks from dental plans last sales process, one of the sources noted. Dental insurers the likes of Guardian Dental, DentaQuest and VantageOne Dental could take a look this time around, the source suggested, though another source said there would be significant complexity in pulling off such a deal.

InterDent also made some changes in the C suite after its previous attempt to sell, tapping what one of the sources described as long-term growth-oriented execs. InterDent in late 2016 brought on Marshal Salomon to fill the CEO post. Solomon joined from Vantage Oncology, where he served as COO of the network of cancer-care-treatment centers through its April 2016 sale to McKesson Corp. 

Founded in 1978, InterDent offers non-clinical dental services under brands including Gentle Dental and SmileKeepers. The company serves about 200 practices in eight states across the western U.S., with affiliated locations encompassing more than 475 dentists.

Moelis, alongside Credit Suisse, is also advising on the auction for Carlsbad, California, Zest Anchors, the Avista Capital-backed maker of overdenture attachments, Buyouts previously reported.

FFL Partners is also looking to exit a couple of dental-service organizations. The San Francisco PE group last year tapped Harris Williams to sell Benevis, and separately retained Houlihan Lokey to advise Midwest Dental on a sale.

In other recent dental activity, Linden Capital Partners in November sold dental-supplies company Young Innovations to Jordan Co in a deal valued a little south of $800 million, sources previously told Buyouts.

Linden just weeks earlier bought Smile Doctors, an orthodontic-support-services company, from Sheridan Capital Partners. Jefferies and William Blair advised Young Innovations on its sale, while the latter also advised Smile Doctors.

Sun Capital Partners in November emerged as the victorious suitor for L Catterton’s ClearChoice following a Goldman Sachs-run auction for the dental-implant company.

Representatives of H.I.G. and InterDent didn’t immediately return requests for comment on Friday, while a Moelis spokesperson declined to comment.

Action Item: Take a look at the rest of H.I.G.’s portfolio https://higcapital.com/portfolio

Update: The story has been updated to include the timing of process and additional detail.

 Child having a dental examination. Photo courtesy of FangXiaNuo/E+/gettyimages