Imperial Capital earns 3.5x its money with Dentalcorp deal

  • ICP said to triple its investment in Dentalcorp
  • Dentalcorp received significant L Catterton investment
  • Company has ‘a lot of runway’: ICP’s Rosenthal

Imperial Capital Group more than tripled the money it put into Dental Corp of Canada following L Catterton’s investment in the company, a person with knowledge of the matter told Buyouts.

Dentalcorp, Canada’s largest network of dental clinics, last week said it raised a significant investment from L Catterton.

Terms weren’t disclosed. The deal generated 3.5x Imperial’s nearly four-year investment, which translates into an IRR of 50 percent, the source said.

The Toronto private equity firm partnered with OPTrust Private Markets Group in 2014 to invest an initial C$121 million in Dentalcorp. The value of follow-on deployments is not known.

Imperial declined comment.

Based in Toronto, Dentalcorp lends organizational and back-office support to general and specialist dental practices, enabling day-to-day autonomy free of key administrative tasks.

The strategy has apparently received a strong reception in Canada’s dental industry, which IBISWorld estimated in 2017 consists of more than 20,000 businesses with revenue of about $15 billion.

Founded in 2011 by CEO Graham Rosenberg, Dentalcorp’s network of dental clinics grew to more than 90 by the time Imperial and OPTrust invested. Four years later, the network reflects more than 250 dental clinics servicing more than 2.5 million patient visits per year.

Instead of parting ways with the company with the L Catterton deal, Imperial, one of Canada’s oldest PE firms, decided to sign on again. It reinvested through Imperial Capital Acquisition Fund VI, which raised C$500 million in 2017. OPTrust also retained a stake.

Managing Partner Jeff Rosenthal, who sits on Dentalcorp’s board, told PE Hub Canada Imperial re-upped because of the company’s track record and continuing opportunity in a large and expanding domestic market. It has “a lot of runway,” he said.

Rosenberg agreed, pointing to Dentalcorp’s market share of roughly 3 percent. He said the game plan over the next five to seven years would be to increase the company’s network to as many as 750 dental clinics.

Dentalcorp will continue to acquire and partner with dental practices where it can “materially reduce administrative burdens” and help create more sophisticated, efficient and service-oriented operations, Rosenberg said. It will also provide resources to support a practice’s “growth ambitions,” he added.

Rosenberg, a former managing director at Clairvest Group, said L Catterton’s experience in consumer and retail industries makes the Greenwich, Connecticut, PE firm especially well-suited to back future organic and acquisition growth initiatives.

Buyouts in March first reported L Catterton’s intention to invest in Dentalcorp.

Fund VI at the halfway mark

Imperial’s reinvestment in Dentalcorp is one of six deals done by Fund VI, which is now more than 50 percent invested, Rosenthal said.

Other investments, all U.S.-based, include AmeriVet, a veterinary-clinic-management business, and Matrix Sciences, a food-testing and compliance-services platform.

Additionally, the fund backed a pair of service providers to the optometry industry.

They include Total Eye Care Partners, launched last year. Its model, broadly similar to Dentalcorp’s, focuses on partnering with medical-related optometry practices and assuming much of their administration. The company’s first partnership, Gaddie Eye Centers, was announced with Imperial’s investment.

The other company is Midwest Vision Investment, a retail optical practice group allied with a digital lens-manufacturing lab.

Investments in AmeriVet, Dentalcorp, Midwest and Total ECP point to the “strong franchise” healthcare services has become, Rosenthal said. Imperial also invests in business and consumer services, as represented in the Matrix deal.

Fund VI is the largest raised by Imperial since the firm was founded in 1989 by Rosenthal and Managing Partner Stephen Lister.

It generally targets North American mid-market companies with Ebitda of $5 million to $40 million and sales of $20 million to $250 million.

Photo of Jeff Rosenthal courtesy of Imperial Capital Group