Scoop: Silver Oak's Smile Partners USA hits the auction block

Silver Oak Services Partners-backed dental services organization Smile Partners USA is up for sale through Piper Sandler, sources tell Axios.

Why it matters: Dental is a well-trod space for private equity but it remains fragmented, and Smile Partners' emphasis on physician alignment differentiates the company.

What's happening: Marketing materials for the Troy, Michigan-based company were distributed in recent weeks, sources say.

• Indications of interest are due on Sept. 13, per one source.

By the numbers: The company is marketing $175 million-plus revenue and $40 million-plus EBITDA for 2022, accounting for its near-term M&A pipeline, the sources say.

• Smile encompasses 90-plus clinic locations including 15 under LOI.

Zoom in: The Midwest- and Southwest-centric DSO provides back-office support services to providers of general and specialty dental services, including oral surgery, orthodontics, and periodontics.

• As a physician-led platform, the DSO has a relatively large doctor-equity ownership model through which a large portion of dentists that join Smile roll equity into the parent company, sources say.

Be smart: More and more PE-backed physician practice management groups are trending towards higher doctor comp and equity models as specialists call for greater autonomy, both clinically and economically speaking.

• For example, look at Axios' previous reporting on GI Alliance — Apollo backed its physician-led buyout with a $785 million non-control preferred and common equity investment.
• Selling investor Waud held just a 30% economic stake (but maintained governance control), with GI Alliance actually boosting physician ownership with the Apollo transaction.

What they said: GI Alliance CEO James Weber told Axios earlier this month that the deal presented the "best of both worlds" in gaining "the backing of all the resources that Apollo has to offer, but allowing us to run the business."

• PE likes the model too, as you inject less cash upfront and keep physicians "invested," one source notes.

Yes, and: Charlesbank Capital-backed MB2 Dental, albeit a JV model, also achieved success with rolled equity model, the source adds.

State of play: In matters of private equity-driven specialty PPM consolidation, dental is a first mover.

• Still, the well-charted area of investment remains fragmented with a steady and repeat customer base. Amid the backdrop of an aging population, that should lend to continued white space for well-run, scaled platforms.

Silver Oak declined to comment, while Piper Sandler did not return requests for comment.

Editor's note: This story has been corrected to note the investment bank is Piper Sandler, not Piper Jaffray.