Harvest Partners wins auction for Affordable Care

Berkshire Partners' Affordable Care scores a valuation of some $2.7bn as technology adoption, future M&A opportunities and a large and growing tooth replacement market present a favorable backdrop for the specialist DSO.

Harvest Partners has won the highly anticipated auction for Berkshire Partners’ Affordable Care, the country’s largest dental services organization specializing in tooth replacement services, according to multiple sources familiar with the matter. 

The deal, which has not yet closed, is valued at around $2.7 billion, some of the people said. 

Berkshire Partners, whose majority stake dates to October 2015, will roll equity in the deal, some of the people said. PSP Investments is co-investing in the deal, they said. 

Affordable Care’s value has grown more than three-fold under its current backers. Berkshire Partners’ leveraged buyout over five years ago valued the company at $825 million, according to Pitchbook. In connection with the transaction, Partners Group through its debt platform invested over $200 million in debt and equity.

Harvest, prevailing over other large buyout funds in the Jefferies-run competitive process, is an experienced investor in the dental category. The New York private equity firm in July 2015 bought Dental Care Alliance, or DCA, one of the largest multi-branded dental support organizations in the US with 330 affiliated practices across 20 states. 

Harvest’s retail healthcare experience is vast, with existing investments including EyeCare Services Partners, Advanced Dermatology and Cosmetic Surgery and VetCor. 

Commanding approximately $2.7 billion, that implies an EV-to-EBITDA multiple approaching 17x for Affordable Care, applying the $160 million in EBITDA for the LTM period ended June 2021, as previously reported by PE Hub.

The premium price for Affordable Care is a testament to private equity’s continued belief around the remaining growth opportunity and innovation to be had in the dental industry, sources told PE Hub. 

As it relates to Affordable Care and those in the business of tooth replacement – specifically fixed, full-arch implants – there is a big push to get dentists to place implants better and faster, ultimately improving patient care, one person noted. Technology adoption – supporting digital workflows and 3D-printed dentures – is playing a big role in the industry’s evolution, the person added.

Affordable Care’s affiliated 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.

Based in Morrisville, North Carolina, 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. 

Buoyed by the DDS acquisition, Affordable Care has made strategic moves to diversify beyond its legacy dentures focus and into more implant services, sources said. Dentures are more affordable, but are a bigger impediment to chewing and wear bones down more easily and are less comfortable than implants. For those who can afford it, there’s a growing market for fixed, full-arch implants that are both more natural in appearance and feel. 

Some Affordable Care practices offer financing through CareCredit and Proceed Finance, while many work with insurance providers, according to its website.

Affordable is growing very well now and positioned for further M&A under its next owner, sources have said, suggesting orthodontics as another growth lever down the road, in addition to technology innovation. 

In other brewing dental activity, US Oral Surgery Management, backed by RiverGlade Partners and Thurston Group, recently engaged Moelis to advise on a process, PE Hub wrote in May. Management and clinicians are focused on partnering with a larger financial sponsor to continue USOSM’s next phase of growth, sources said at the time. USOSM is one of the first platforms to grow and consolidate the oral surgery market.

In relevant trades, Sun Capital Partners last year sold ClearChoice Management Services at a more than $1.1 billion valuation to dental support giant Aspen Dental Management, which is owned by an investor group that includes Ares Management, Leonard Green & Partners and American Securities. ClearChoice provides non-clinical support services for centers focused on fixed dental restorations (and not dentures) for patients with missing or failing dentition.

For Harvest, Affordable marks its first new healthcare investment since March 2020, when, through Harvest Partners Structured Capital, it invested in ConnectiveRx alongside Blackstone Tactical Opportunities. The pair of firms invested a combined $300 million in convertible preferred equity, PE Hub wrote, joining Genstar Capital as minority investors in the medication assistance company.

In other healthcare activity, Harvest last year quietly bought back Oak Hill Capital’s stake in VetCor, increasing its stake in one of the country’s largest vet chains, sources told PE Hub. Harvest and Cressey & Co. originally invested in VetCor in April 2015, following which Oak Hill joined as an investor through the recapitalization in mid-2018.  

Harvest, Berkshire, Partners and Jefferies declined to comment. Affordable could not immediately be reached.