MAJOR ACQUISITION SHAKES UP CANADIAN DENTALCARE
John McNabb BA(Hons), Q.Arb, CHFS
![John McNabb BA(Hons), Q.Arb, CHFS]()
John McNabb BA(Hons), Q.Arb, CHFS
M&A Expert - 80 Deals, $3 Billion+ / VC & PE / Hedge Fund / Healthcare / Founder / CEO / Strategist / Master Negotiator / LinkedIn "Top Voice"
Reliable sources tell us that Ottawa-based private equity fund Persistence Capital Partners has finally found a buyer for MCA Dental Group, a mid-tier Canadian dental service organization (DSO).
This doesn’t come as a surprise.? Persistence Capital has been trying to exit its investment in MCA Dental for the past 2 years.
The identity of the prospective buyer is unknown. However, we understand from our sources that they are bigger and financially stronger than Persistence Capital, capable of more aggressively supporting MCA Dental with additional acquisition funding.
Terms of the deal are not known, but it is estimated to be valued near $200 Million. Timing is unclear: there are conflicting reports but our most reliable information is that it is likely to close sooner rather than later, possibly by the end of this month.
Persistence Capital originally invested in MCA Dental when it was a start-up in 2018.? Since then, MCA has had its ups and downs.
Initially, in the heady days of cheap money and frothy dental practice values in 2018 and 2019, MCA thrived. They grew rapidly by acquisitions.
However, in 2020, months of COVID-mandated shutdowns seriously disrupted MCA’s business. Revenue tanked. ?Corporate liquidity and Bank credit dried up. Debt-fuelled acquisitions, the foundation of MCA's growth, stalled.? Their corporate focus shifted from thriving to surviving.
Persistence Capital left MCA to struggle on its own through 2020 because Persistence lacked sufficient financial strength to either unilaterally recapitalize MCA or to attract another PE partner. Finally, in July, 2021, Persistence was able to bring in a new PE investor, DWS Group from Germany, and MCA was recapitalized.
The July, 2021 recapitalization put MCA back on solid financial ground and enabled a return to acquisition-driven growth. However, the respite was short-lived. As interest rates marched higher in 2022, debt management and debt-fuelled acquisitions became steadily more difficult.
Things got so bad that in November, 2022, Persistence Capital publicly announced it was seeking to sell MCA through RBC Capital Markets. But, in the prevailing environment of significantly higher interest rates, declining business valuations and MCA's highly leveraged balance sheet, there were no buyers. ?
In May, 2023, Persistence Capital announced it was ending its unsuccessful effort to sell MCA.
At that point, Persistence Capital was forced to recapitalize MCA a second time.? The banks wanted Persistence Capital to inject equity.? Persistence Capital resisted – they were in the midst of pouring more than $400 Million into Neighbourly Pharmacy, their flagship roll-up of 700 retail pharmacies.
Negotiations were lengthy and difficult.? Ultimately, in December, 2023, MCA was recapitalized.? But the result for MCA was mainly financial stability, not a lot of additional capital for growth.
And Persistence Capital – the unwilling parent – still wanted out.
Now Persistence Capital Partners has reportedly finally found a buyer for MCA Dental Group.?
This is good news for both Persistence and MCA!
A sale will provide liquidity for Persistence and enable them to pursue their primary consolidation interests in the retail pharmacy and medspa sectors.
And it will provide MCA with a financially and strategically committed parent that can support MCA’s growth trajectory – so MCA's focus can now shift again, from surviving to thriving.
This acquisition certainly highlights the ongoing evolution in the dental healthcare sector in Canada. With significant investments like this, it will be interesting to see how it impacts the broader landscape, particularly in terms of service delivery and patient experience. It raises important questions about the future of dental practices and patient care models. How do you see this trend shaping the industry moving forward?
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