SEC’s Gensler unveils potential agenda for path to greater transparency in PE, Five Arrow’s Stepping Stones starts sale process, Orangewood buys Taco Bell franchisee

SEC's Gensler talks PE transparency while Five Arrow's Stepping Stones hits the market.

Good morning!

It’s Veteran’s Day. Thank you, veterans, for your service.

In today’s rundown, we’ve got the scoop on more than one healthcare situation, plus one involving a popular fast food chain I used to indulge in during my college days… but first, let’s talk reg.

Top financial regulator Gary Gensler is advancing options his agency can take to introduce greater transparency and a level playing field in private markets, writes my colleague Kirk Falconer for Buyouts. Gensler, installed as chair of the Securities and Exchange Commission in April, laid out a potential agenda for action at the 2021 ILPA Summit, held this week.

Gensler said he has tasked regulatory staff with assessing, and preparing recommendations on, key issues of interest to general partners and limited partners alike.

They include the transparency of fees and expenses; how side-letter provisions might benefit from increased transparency or whether certain varieties should be prohibited; performance metrics and suggest ways for improving transparency, among other things.
Gensler’s overarching goal, he said, is to “bring more sunshine and competition to the private funds space.”

Read Kirk Falconer’s full report on Buyouts.

Healthcare: Five Arrows Capital Partners is seeking a buyer for Stepping Stones Group, a behavioral health platform focused on providing comprehensive services to school-age children, according to sources familiar with the firm’s plans.

A competitive sale process aimed exclusively at private equity buyers recently kicked off for the Chicago-based business, with Moelis engaged for sell-side advice, sources said.

Stepping Stone’s previous owner, Shore Capital, made around 7x when it sold the business to the North American corporate private equity business of Rothschild Merchant Banking. Based upon the Chicago-based company’s growth in the last four years, the latter also looks poised for a nice outcome (although it remains early). The company is projecting approximately $65 million of EBITDA for the 12-month period ended June 30, 2022, sources said.

Check out my full report on PE Hub.

First-mover: Also this week, US Oral Surgery Management emerged as the target of the first secondary PE transaction involving a practice management platform dedicated to the oral surgery market.

Oak Hill Capital Management’s recently completed acquisition of USOSM valued the Irving, Texas-based business between $700 million and $750 million, according to sources familiar with the deal terms. That’s almost 15x the company’s estimated 2021 EBITDA of about $50 million, sources said.

Traditional dental support organizations have witnessed significant private equity activity, but the universe of oral surgery platforms are few and far between. Besides serving as a scarcity value play, good fundamental growth trends are supporting what one source called a “rising tide” around this specialty.

What’s driving growth? Oral surgeons are largely in charge of placing dental implants, and that market is continuing to take share from dentures and bridges. The segment is also in the early days of consolidation and opportunities to remove operational inefficiencies are vast. All the same time, a largely cash pay reimbursement model and high-margins add to an attractive investment backdrop.

Side note: Micah Meisel joined Oak Hill as a partner in 2020 from InTandem Capital Partners, where he previously led the firm’s investment in Paradigm Oral Surgery, one of few other PE-backed management services organizations serving oral surgeons.

Read my full report on PE Hub.

Tacos for life: Long-life investor Orangewood Partners has acquired Pacific Bells, a leading Taco Bell franchisee in the United States, from Partners Group, writes Aaron Weitzman for PE Hub.

Alan Goldfarb, founder and managing director of New York-based Orangewood, said the firm had gotten to know the Taco Bell franchisee’s management team and founder over “many years” before a chance to transact emerged.

“When this opportunity came up, we both viewed it as a true partnership opportunity,” he said. “Given the substantial roll-over by management, we see this transaction more as a management buy-out than anything else.”

Launched in 1986 with the first store in Tualatin, Oregon, Pacific Bells has grown to over 250 restaurants in nine states.

Goldfarb, who founded Orangewood after a five-year tenure at Senator Investment Group and a previous stint at Carlyle, called Pacific Bell a “prized asset within the Taco Bell system” that it will look to build upon.

“The opportunity is to grow the business organically, through new unit builds, as well as acquisitions,” both in existing markets and new ones, he said. More technology, automation and innovation will also be in the cards. Read more on PE Hub.

That’s it for me! Have a great day, and as always, write to me at with any tips, gossip or feedback.