Sentinel combines US mobile dental service providers

The merger of two peers in the industry will create the largest provider of mobile dental care services in the US and represents the smaller mid-market shop's fourth transaction in the dental services sector.

Sentinel Capital has added to its platform mobile dentist provider, Arizona-based ReachOut Healthcare America, with the acquisition of a Michigan-based peer, Mobile Dentists.

Details of the transaction were not disclosed, but the firm's target investment range is smaller mid-market companies with EBITDA of between $5 million and $25 million. In July, PEO reported that Sentinel had closed a fourth fund for acquisitions in this sector, totaling $765 million (€520 million).

The transaction is being financed with equity from Sentinel's third fund of $319 million and a senior debt facility provided by Golub Capital, which underwrites first lien loans up to $150 million.

Sources close to the transaction said that Sentinel's third fund is nearing the end of its life, with the Mobile Dentist acquisition marking the firm's fourth investment in a dental services business. Sentinel previously acquired stakes in Castle Dental Centers and Metro Dentalcare, in addition to ReachOut. It also represents somewhat of a rarity in the private equity industry: the acquisition of a company with not-for-profit as well as for-profit operations.

“It's the kind of business you feel good about owning,” Paul Murphy, a Sentinel partner, told PEO. 

Both ReachOut and Mobile Dentists provide mobile dental services primarily to low-income children and members of the military.

The companies also compliment one another geographically – ReachOut serves customers primarily on the West Coast of the US while Mobile Dentists covers East Coast. The combined entity will operate in 21 states and more than double the number of low-income children that ReachOut served before the merger, to 250,000.

Additionally, Murphy cites the management teams' familiarity with each other and with Sentinel, as well as their shared mission and cultural fit, as catalysts for the transaction.

“Both companies are social enterprises dedicated to serving the underserved,” Murphy said, adding that Sentinel shares the same vision.

Asked whether he foresaw uncompensated care and delays in reimbursements from Medicaid – a government-sponsored insurance program for low-income children in the US – as a potential problem for the combined entity, Murphy noted that “the reimbursements are there”. He added that the company verifies eligibility for Medicaid and that most of the low-income children that it serves are Medicaid eligible.