Sentinel Capital Partners has acquired mobile dental services provider ReachOut Healthcare America. It is the firm’s third acquisition in the past three months, and its third investment in the dental care sector.
ReachOut provides mobile dental services to under-served children in schools and foster programmes as well as the aged and disabled in residential facilities, a large portion of whom receive Medicare or Medicaid benefits. The company also services US Army and National Guard units throughout the country.
The business is one that “you can feel good about owning”, said Sentinel partner Paul Murphy. Up to 80 percent of children who are eligible for Medicaid do not receive benefits, because they cannot get to clinics for a variety of reasons, Murphy said. ReachOut brings the clinic to them.
But the business also has impressive growth prospects, he said. ReachOut’s contracts are primarily in the southwestern US at the moment, but the company’s business model is easily scalable. Since ReachOut does not need to build clinics to enter new markets, the business can be expanded throughout the US faster and at a lower cost than a traditional dental chain. Reaching out to new customers is also easier because the product is delivered to them directly.
Sentinel likes the dental care industry, having invested in two other dental care companies in the past. The industry is appealing, Murphy said, because it is a large and growing industry with stable cash flows that cannot be outsourced overseas.
Sentinel’s past dental investments have provided the firm with solid returns. The firm paid $12.7 million (€8.7 million) for a majority stake in Castle Dental Care Centers in 2003, and sold the company to Bright Now! Dental in 2004 for $56 million, generating a 2.2 times return and a 189 percent IRR.
This September, Sentinel sold its stake in Metro Dentalcare to American Dental Partners, earning a return of 5 times its original investment and generating a triple digit internal rate of return.