Kind Of A Big Deal—Sentinel Capital Partners

These days, the word “big” is a relative term for PE professionals. In a semi-regular column, I’ll explore how the some of the biggest (or at least most interesting) deals are getting done.Today’s Big Deal (Kind Of) goes to Sentinel Capital Partners, for its purchase of Mobile Dental Services. My pick is a bit of a cop-out, since Sentinel won’t say how big the deal actually was, and we’re talking no info whatsoever here. No revenues, no EBITDA, no stake size, no purchase price, no purchase price multiple. All we know is that when it comes to perfect fit, this add-on acquisition is it.

Sentinel Capital Partners, fresh off a wildly successful round of fundraising (seriously, they wanted $600 million and got $765 million), considers itself a bit of an expert in the dental services industry. It had three such deals under its belt, but last November’s purchase of ReachOut Healthcare America was different. ReachOut provides dental care not to paying clients with insurance, but to Medicaid-qualifying children. The company provides much-needed access to the government-supported care by administering in schools. ReachOut is one of two such companies to offer this service. The other one, of course, is Mobile Dentists.

ReachOut and Mobile Dentists were founded separately around 10 years ago, and when ReachOut sold a controlling interest to Sentinel, the founders of Mobile Dentists took notice. Sentinel took notice of Mobile Dentists, too. According to Sentinel’s Paul Murphy, Mobile Dentists was first on the list of potential add-on acquisitions.

Earlier this year, the timing was perfect to start talking to bolt-on targets, but before Sentinel could approach Mobile Dentists, Mobile Dentists approached Sentinel. “They told us they wanted a financial partner,” Murphy says. “Everyone saw that one plus one equals three, especially since there was no (geographic) overlap of the businesses.”

So it’s a very shiny happy deal with no visible, ahem, cavities, so to speak. Even the financing looks squeaky clean. Golub Capital provided senior debt and Audax provided mezzanine finance. A number of lenders expressed interest in the transaction, Murphy explains, because dental care is not cyclical, and a service like the one provided by ReachOut Healthcare depends on money from state governments, so (though unlikely) any change in Medicaid would not deliver a full-on blow to the business.

Management from both companies will stay involved, holding a minority stake. The investment came from Sentinel’s third fund, mostly because ReachOut was also in the third fund. It hasn’t started to deploy its fourth fund yet.