Smile Brands auction struggles, sources say

04 January 2020

The late-stage sale process for West Coast dental practice management group Smile Brands is struggling to cross the finish line, said three sources familiar with the matter.


Smile and its private equity backer Gryphon Investors rejected a low double-digit EBITDA multiple bid from auction front runner Apax Partners late last month, two of the sources said. It is now unclear if Smile Brands is continuing with the process, although the sources said Smile would like to have a deal done in early 2020.


It remains possible that Gryphon could go back to the previously interested parties or find others to forge a deal, two of the sources said. It is possible that a “alternative funding source” such as large international pension fund, may have recently joined the mix, the sources said.


Alternatively, Gryphon may elect to keep the business and make additional acquisitions, one source added.


Irvine, California-based Smile Brands, a manager of 425 affiliated dental offices in 17 states, generates around USD 70m of EBITDA, this news service previously reported. Moelis has been advising on the process that started last fall.


In late November, this news service reported that Apax, TSG Consumer Partners, Advent International and Harvest Partners, which owns Dental Care Alliance, were vying for the company.


Smile has been a portfolio company of Gryphon since 2016, when it bought the company from Welsh, Carson, Anderson & Stowe (WCAS) for an undisclosed price.


The Smile auction comes after another closely watched Moelis-led auction for EyeCare Partners was completed with a sale to Partners Group for an undisclosed price that press reports said was USD 2.2bn.


San Francisco-based Gryphon previously owned Smile predecessor company Bright Now! Dental from 1998 until 2005, but repurchased the company in 2016 and revived it under the leadership of co-founder Steve Bilt, who had left the company when it was held by WCAS.


The company was founded in 1998 by a management team that included Bilt and CFO Brad Schmidt and has grown rapidly both organically and through acquisitions, particularly after Gryphon repurchased the firm. Smile Brands has made at least eight acquisitions of dental practices since Gryphon’s investment, according to Mergermarket data.


Smile Brands, Gryphon and Apax didn’t return requests for comment. Moelis declined to comment.