Investor Puts Money Where Mouths are With Dental Deal

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Private equity outfit Brentwood Associates made a big foray into the health care world last week with the acquisition of Texas-based Jefferson Dental Care from Century City’s Black Canyon Capital.

The parties did not disclose financial terms of the transaction, but sources close to the deal said Jefferson’s earnings before depreciation, interest, taxes, and amortization were in the range of $15 million to $19 million, and that Brentwood paid a low-teens multiple for the company. Those terms would place Jefferson’s value north of $200 million.

While Brentwood has long been active in consumer-facing industries, health care opportunities represent a new push for the firm, according to Partner Eric Reiter.

“The health care business has a lot of similarities with other consumer-facing industries,” he said. “We’ve been around since 1972, and to my knowledge this is one of the first pure forays into health care, but given the Brentwood tool kit we’ll be venturing into the space more.”

Jefferson has about 60 outposts across Texas with a focus on the Houston and Dallas-Fort Worth metropolitan areas. Reiter said Brentwood would continue to grow the company by expanding the number of locations, using the firm’s data analytics capabilities to help Jefferson analyze where to open branches.

The private equity shop will also provide support to the company on the mergers and acquisitions front, where Jefferson hasn’t been as active in the past, according to Reiter.

“Portfolio company acquisitions have been a key focus for us, and we’ll be able to help them out with that area as well,” he said.

On Black Canyon’s side, the deal was led by Managing Director Michael Hooks. The firm purchased Jefferson in 2009 and helped grow the company from some 25 clinics to its current size. Jefferson was the last investment left in Black Canyon’s fund and Hooks has gone on to form a firm called Westhook Capital.

As for the Jefferson deal, he said the company was on solid footing and would continue to grow with Brentwood at the helm.

“I was really pleased with our experience with Jefferson,” Hooks said. “It’s a high-quality company, and I expect they’ll continue to do well under Brentwood.”

Jefferson was represented by investment bank Moelis & Co., which ran the bid process, and attorneys from O’Melveny & Myers. Brentwood received legal representation from Kirkland & Ellis and Ares Capital Corp. provided debt financing.

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