State of play: Like other specialties, labor is the biggest pain point in dental right now, the CEO says. That's perhaps reflected by diverging deal multiples: A single practice acquisition goes for some 8x-plus EBITDA in Canada, versus 4.5x EBITDA in the U.S., the CEO says.DSOs north of the border have better EBITDA margins, he notes, thanks to stronger same-store sales growth and the lack of lab fees."At some point, it might be a better time to have a marriage, but today wasn't the day.".Heartland via the strategic partnership helps 123Dentist with purchasing power and systems operations, positioning it for another potential transaction opportunity down the road.Yes, but: Why not just buy 123Dentist? "It was too expensive," Bauer says. Financial terms weren't disclosed, but Bauer says Heartland injected $50 million into what is now the second largest dental platform in Canada after L Catterton's DentalCorp.It will target 150 and 200 de novos in 20, respectively, he adds - giving it a tremendous growth runway even without big M&A.Ĭatch up fast: KKR and Heartland in July invested in a newly combined Canadian DSO created via the merger of Peloton Capital Management's 123Dentist, Sentinel Capital's Altima Dental and Lapointe Groupe.
Yes, and: Heartland, which Bauer says will surpass $3 billion in revenue, aims for 100 de novos this year. With inflation, rising wages, and an inability to increase rates, "the PPOs are just crushing the solo practitioner," he says.The pipeline of solo practitioner acquisitions remains robust (Heartland is on track to do 120 single-practice acquisitions this year).What he's saying: It's going to be tough for any platform to get new capital for the next eight months or so, Bauer predicts: "Everybody is on hold for larger acquisitions." Why it matters: Difficult financing markets and labor costs have put pressure on the physician practice management deal landscape, and Bauer's comments substantiate market chatter that most $1 billion-plus PPM deals remain on ice. KKR-backed Heartland Dental, the biggest sponsor-backed dental service organization in the U.S., won't "keep on buying just to buy" as scaled dental M&A activity cools, says CEO Pat Bauer.
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