Sydney dentist and entrepreneur Dr David Penn has sold a majority stake in his business Southern Cross Dental Laboratories to a private equity company in a deal worth nearly $100 million.
Penn will remain chief executive of the business he started nearly 30 years ago while private equity player Ironbridge Capital takes a 60% stake.
Under the deal, Southern Cross is valued at $95 million, including debt, which is an estimated six times earnings before interest and tax.
Neil Broekhuizen, joint chief executive and founding partner of Ironbridge, told SmartCompany the investment in Southern Cross was the private equity company’s first foray into the dental industry.
“We have invested previously in hospitals, in aged care, in pharmaceuticals, in fertility and obstetrics but not dentistry,” says Broekhuizen.
“The business has got very good growth prospects. It supplies a very high quality product at extremely competitive prices into the Australasian marketplace.
“The business has a number of innovations and developments that are yet to come to the market, which also attracted us, and generally the dental sector has some positives.
“Clearly there is an increasing focus on dentistry from a cosmetic and healthcare point of view and the ageing population also plays into the hands of the dentistry market as people’s teeth deteriorate as they get older.
“If people are living longer, to live a decent life, they need to have decent teeth.”
Broekhuizen says there are “significant opportunities” overseas for Southern Cross, which already has small operations in New Zealand, Ireland and the UK that Ironbridge will look to grow.
Broekhuizen says Penn has retained “a significant stake” in the business and is subject to a two-year service contract, but “our expectation is we will be partners to continuing the growth of the business”.
“We will be attempting to grow the business organically and inorganically,” says Broekhuizen, which may involve “acquisitions at the right price”.
Penn is a successful dental surgeon in Double Bay and has also developed a range of new appliances for temporomandibular disorders and sleep apnoea.
He still works about seven hours a week as dentist and also teaches internationally on the topics of aesthetic dentistry and the invisible braces known as Invisalign.
“This has not been an overnight success; it’s been a lot of hard work,” Penn told The Australian Financial Review.