Scoop: BC Partners' Zest Dental starts sale process

BC Partners formally kicked off the sale process for Zest Dental Solutions this week, sources tell Axios.

Why it matters: Zest is one of few scale assets hitting the market post-Labor Day and has minimal exposure to inflationary and labor issues — two of today's biggest concerns facing health care companies in this challenging deal environment.

By the numbers: The Carlsbad, California-based dental products company projects over $70 million of 2022 adjusted EBITDA, and a deal could value the business north of $1 billion, sources say.

• Zest has 50%-plus EBITDA margins and modest CapEx, as it benefits from the sales groups of its large implant manufacturer and commercialization partners, one source says.
• Close to 40% of Zest sales are generated from its faster growing e-commerce and direct-to-dentist/DSO strategy, which is slowly taking share from implant partner manufacturers.
• This pivot boosted margins and product price point, driving organic growth in the teens over the recent years, per Axios' June report.

Details: SVB Securities and UBS are managing the private equity-focused sale process.

• The PE focus ties to Zest's main product being compatible with implant systems sold by partners, removing natural strategic buyers.
• Implant manufacturer partners include Zimmer Biomet, Dentsply Sirona, Implant Direct, Glidewell Dental and others, per the company's website.

How it works: Zest is considered the dominant player in overdenture attachments used to implant a full set of teeth — which aims to be a less invasive procedure alternative for tooth replacement than traditional screw-retained methods.

• Its product portfolio has expanded under BC Partners, with solutions that both preserve natural teeth and solve for total edentulism, or no teeth.

State of play: The global dental implants market is expected to surpass $6.31 billion by 2030, up from $3.84 billion in 2021, per Precedence Research.

• Underlying drivers include increasing rates of poor eating habits, smoking, sugar consumption and an aging population.

Catch up quick: BC Partners bought Zest from Avista Capital Partners in February 2018.

• Zest in early 2019 named industry veteran Tom Stratton CEO, from Danaher; and later that year named Kim Smith CFO, from Wetzel’s Pretzels.
• The company diversified via purchases of Danville Materials, a maker of small equipment and dental consumables, and Iveri Whitening.
• Sources say whoever buys Zest may see further opportunity to unlock organic growth by innovating on the product side.

BC Partners declined to comment.