With post-pandemic dental business largely back in action for those able to ride out a period of pandemic shutdowns, a first-mover in the oral surgery market joins the flurry of dental platforms expected to trade hands this year.
US Oral Surgery Management, backed by RiverGlade Partners, whose founding members spun out from Sterling Partners in 2017, and Thurston Group, is gearing up for a sale, according to people familiar with the firm’s plans.
Moelis has been hired to advise on an upcoming process, they said. Management and clinicians are focused on partnering with a larger financial sponsor to continue USOSM’s next phase of growth, some of the people said.
Representing one of the first platforms to grow and consolidate the oral surgery market, RiverGlade and Thurston formed USOSM in late 2017. Led by CEO Richard Hall, the management services organization provides partnership and support services to oral surgery providers across states including Texas, Colorado, Georgia, Alabama, Tennessee, Minnesota, Oklahoma, Louisiana, South Carolina and Florida.
As a shared-resource organization, USOSM offers surgeons an equity stake in the network, rapid expansion opportunities through direct-to-consumer marketing, and greater operational efficiencies to increase patient volume and care, according to its website.
Sources said the company generates $35 million-plus in EBITDA.
Although no existing oral surgery platforms have traded hands in secondary PE transactions, sources said they would expect USOSM to command a multiple similar to those seen by other high-quality physician practice management specialties.
USOSM, sources said, ought to benefit as a first-mover in oral surgery – a market early on in its life cycle lending to significant white space for growth and consolidation.
Numerous private equity firms back traditional dental support organizations, whereas, outside of USOSM, few oral surgery groups have fielded institutional capital.
DSO platforms typically focus on general cleanings, orthodontics and less comprehensive procedures, many of which choose not to sedate patients because they don’t want the added accountability and compliance required, one person explained. Those procedures are often outsourced to oral surgery groups.
Other relevant platforms on the oral surgery side include InTandem Capital Partners’ Paradigm Oral Surgery, formed in mid-2019 through the fusion of three groups: Nebraska Oral and Facial Surgery, Omaha Oral Surgery and Advanced Oral Surgery.
Oral surgery is compelling for a variety of reasons, sources told PE Hub. “This area of oral surgery is red hot,” one source said. “There’s a lot of folks looking [at the space].”
A high-growth market, oral surgery groups are high margin businesses, have a heavier cash pay component and less reimbursement risk when compared with traditional DSOs, sources said. At the same time, oral surgery – not unlike cosmetic dermatology – is also a play on a broader trend around peoples’ growing desire to look better, fueled by today’s Instagram and social media culture among other things.
The upcoming process comes as a handful of dental assets are poised to test the market this year, sources told PE Hub.
Other specialty dental companies making noise include Affordable Care, the country’s largest dental support organization focused on tooth replacement. PE Hub wrote in May that Boston’s Berkshire Partners is working with Jefferies on a sale process for the business, which could ultimately value Affordable at more than $2 billion.
In relevant trades, dental support behemoth Aspen Dental last year scooped up ClearChoice Management Services from Sun Capital Partners. Aspen is backed by an investor group that includes Ares Management, Leonard Green & Partners and American Securities.
For Aspen, the deal offered a means to gain access to centers offering specialized implant capabilities not offered at a traditional dentist office, as ClearChoice specializes in non-clinical support services for centers focused on fixed dental restorations for patients with missing or failing dentition. The deal was valued at more than $1.1 billion, PE Hub wrote in November.
Although patient flow is by and large back – with a rebound in check-ups leading to everything from more fillings to more dental surgeries – a broader challenge faced by the dental industry persists. That is, not unlike restaurants or retail outlets, labor shortages resulting from unemployment benefits continue to deter individuals from returning to work, one source said.
“If you went back two to three years ago… people were saying dental is played out,” this person added. “But there’s winners and losers, and the guys that executed correctly and have taken the time to integrate acquisitions, [or] have opened de novo units methodically… those businesses are doing well.”
Moelis declined to comment. RiverGlade and Thurston did not return PE Hub’s requests for comment.