First Round: Dodgy dentistry

Well, sort of. Bloomberg recently reported that US dental management companies have come under investigation by the US Senate due to “allegations of unnecessary procedures, low-quality treatment and the unlicensed practice of dentistry”. 
The link? These businesses are a popular investment target for private equity firms, who have backed at least 25 of them in the last decade.

Sadly, two of these businesses filed for bankruptcy protection this year after being accused of questionable operating procedures, according to Bloomberg. All Smiles Dental Center, owned by Chicago-based Valor Equity Partners, went bust in part from being cut off from US health program Medicaid for “excessive” and “inappropriate” orthodontic practices, according to a bankruptcy filing. 

The Carlyle Group-backed Church Street Health Management also filed for Chapter 11 after a series of painful lawsuits, Bloomberg reported.

Happily, the industry is fighting its corner tooth and nail. “The dental space has been growing at 6 percent per annum since 1990,” OMERS senior managing director Michael Graham told Private Equity International last October. “It’s pretty much recession resistant.” 

US-based lower mid-market firm Sentinel Capital Partners would certainly agree: it generated a 5x return multiple from its investment in Minnesota-based Metro Dentalcare, and has successfully exited a number of dental care providers in recent years. 

Hard to swallow for the industry’s critics, First Round would wager.