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BlackRock LTPC buys InTandem's Paradigm for $900M-plus

Sep 22, 2022
Illustration of a mouth mirror with Benjamin Franklin's face reflected in it.

Illustration: Gabriella Turrisi/Axios

BlackRock Long Term Private Capital acquired a majority stake in Paradigm Oral Health from InTandem Capital Partners, valuing the oral surgery company north of $900 million, sources tell Axios.

Why it matters: The traditional DSO universe (ie. those focused on general cleanings and orthodontics) is well-charted territory for private equity, but oral surgery is much earlier on in its life cycle. Paradigm is one of few assets of scale positioned to consolidate the space as dental implant adoption accelerates.

Backstory: The deal concludes a Houlihan Lokey-run sale process, with BlackRock's offer topping other finalists including Partners Group, sources say.

  • $64 million of EBITDA was marketed for the company, however, sources say bidders underwrote closer to $50 million to $55 million — suggesting a high teens multiple.

Catch up quick: Paradigm under InTandem's three-plus years of ownership scaled immensely, expanding from just four locations in two states to 75 facilities across 24 states.

  • Led by CEO David Rallis, Paradigm now partners with over 100 surgeons providing oral health care and dental implant surgery.

State of play: Paradigm is one of few secondary PE transactions in oral surgery to date, the other notable trade being Oak Hill's November 2021 deal for US Oral Surgery Management.

  • Oak Hill's USOSM buy was valued between $700 million to $750 million, or just below the 15x the company's estimated 2021 EBITDA of about $50 million, sources told Sarah at the time.

Yes, and: Besides market fragmentation and the scarcity of large platforms, the oral surgery market has a number of compelling tailwinds going for it.

  • Dental implants, while more costly than dentures and bridges, are the most efficacious tooth replacement solution and increasingly taking share. (U.S. market penetration is behind other countries, one source notes.)
  • The U.S. oral surgery market size was estimated at north of $15 billion in 2020 and is anticipated to grow at a CAGR of more than 7% through 2027.
  • Oral surgery groups also tend to have higher margins than general DSOs, with a modestly heavier cash component.

Context: For LTPC, BlackRock’s only direct private equity strategy, Paradigm aligns with its typical playbook of backing strong management teams in industries with a lot of runway for growth.

💭 Our thought bubble: Even in today's challenging environment, well-performing assets in compelling growth segments are still commanding a lot of attention — and the premium valuations are reflecting that.

  • The price tags on Paradigm and another pending deal — KabaFusion — inject some optimism into the market.

BlackRock, InTandem and Partners Group declined to comment.

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