Imperial Capital, OPTrust join forces in $121 mln investment in Dental Corp

Smiles were brighter at Canadian private equity firm Imperial Capital Group and OPTrust Private Markets Group (PMG) last week as the two organizations completed a joint $121 million investment in Dental Corp, a group of Canadian dental care clinics.

For Imperial, which in March raised $295 million in the oversubscribed final close of its fifth mid-market fund, Imperial Capital Acquisition Fund V, the deal represents a couple of important milestones.

To begin with, Dental Corp is the firm’s largest investment in its 25-year history.

In addition, it is the fifth in a series of healthcare deals done by Imperial. Dental Corp may for this reason be considered emblematic of the sizeable opportunity that the firm continues to see in North America’s healthcare sector.

Dental Corp lends organizational and back office support to a network of clinically and operationally autonomous dental practices. Through its partnership model, the company essentially allows dentists to be dentists—freeing them of heavy administrative tasks to focus instead on patient care. The goal is to bring a new level of sophistication and collaboration to the dental industry.

Founded in 2011, the Toronto-based business has scaled rapidly. Within three years, Dental Corp established partnerships with more than 90 generalist and specialty dental practices and revenues of around $200 million.

Imperial invested in Dental Corp after several years of research and combing of the North American industry for quality opportunities, said partner Justin MacCormack and vice president Gene Chkolnik in an interview with peHUB Canada.

“We’ve always liked dental and came close on a couple of proprietary deals in the past,” said MacCormack. Out of the more than two dozen opportunities reviewed by Imperial, he said Dental Corp turned out to be exactly what it was looking for, as the company offers a strategic platform for consolidating a highly fragmented industry.

“Dental Corp is very well positioned in the Canadian market and has developed great credibility and trust with dentists. Existing partners in the company’s network reflect the dental industry’s top quartile in terms of quality, technology and innovation.”

Going forward, Dental Corp’s consolidated platform will be deployed for “further roll-ups of dental clinics,” said Chkolnik. Because its model is relatively new to the domestic market, he believes the company has “first mover advantage.”

With OPTrust PMG as a partner, Imperial was able to write a big enough cheque to assume a controlling stake in Dental Corp. On point on the transaction for OPTrust PMG was Sandra Bosela, who is co-head of PMG and responsible for its global PE activity. She is also a former senior partner at Edgestone Capital.

Jeff Rosenthal, co-founder and managing partner of Imperial, told peHUB Canada that Bosela’s experience made OPTrust PMG “the right partner for Imperial in getting the deal done.”

The transaction also holds significance for the Canadian pension fund manager, which invests $16 billion in assets on behalf of OPSEU Pension Plan. Last August, OPTrust PMG indicated it was giving more priority to sourcing attractive direct opportunities, including co-investments and co-sponsorships.

Dental Corp will mark OPTrust PMG’s 11th direct deal in the last two years and is “illustrative of the group’s move to write larger cheques in more active opportunities with like-minded partners,” Bosela told peHUB Canada.

“Our direct private equity strategy is built upon actively investing alongside experienced investment partners and strong management teams in growing, market-leading companies,” she said. Dental Corp “is testament to our ability to execute on that strategy.”

Bosela will join MacCormack and Rosenthal on Dental Corp’s board of directors. Chkolnik and OPTrust PMG’s Ryan McGovern will be board observers.

At the table will be some additional PE talent. Dental Corp was co-founded by Graham Rosenberg, who from 1993 to 2001 was a managing director at Canadian private equity firm Clairvest Group. Rosenberg is currently co-CEO of Dental Corp, a role he shares with Dr. Andrew Meikle.

“Graham has a private equity mindset,” observed MacCormack. “With him on board it feels like we have a fully aligned team of private equity professionals to drive Dental Corp’s growth strategy.”

MacCormack was hired by Imperial in 2007 to lead its healthcare practice. He came to the job with excellent credentials, as he previously served as a director at Onex Corp. He was actively engaged in several of Onex’s major healthcare acquisitions, including Emergency Medical Services and Skilled Healthcare. Emergency Medical Services was sold in 2011 to Clayton Dubilier & Rice for US$3.2 billion.

Imperial’s first healthcare transaction was its 2008 investment in Schulman Associates IRB, a Cincinnati-based provider of clinical research review services to the pharmaceutical sector. In 2011, the firm also acquired healthcare services company AIM Health Group with founder and CEO Dr. Lu Barbuto. Imperial recently exited that investment. And last October, it invested $17 million in STI Technologies, a Halifax, Nova Scotia-based provider of healthcare reimbursement services.

“The investment team at Imperial has been very supportive of our focus on North America’s healthcare industry and our belief in its strong growth fundamentals,” said MacCormack.

Chkolnik said that support has increased over time “with deal experience and particular success investing in Canadian healthcare companies.”

MacCormack said he believes that deals like Dental Corp fit well with the tried-and-true, domain-focused investment thesis observed by Imperial since 1989.

“In general, we look for great companies with great management teams and the opportunity to invest ahead of the curve,” said MacCormack. The healthcare businesses we partner with will typically have a solid market position and a clear strategic pathway to growth—like Dental Corp.”

With headquarters in Toronto, Imperial is staffed by 12 investment pros. They include Glen Silvestri, formerly of Teachers’ Private Capital, who joined the firm in July as a partner.

 Photos of Justin MacCormack and Gene Chkolnik courtesy of Imperial Capital