Former Ontario Teachers’ directors’ new private equity firm invests in dentist platform

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Closeup of dentist looking at dental x-ray plate © rido / 123RF Stock PhotosPrivate equity firm Peloton Capital Management has made its inaugural investment of $75 million in 123Dentist, the largest majority Canadian-owned network of dental practices.

Peloton, which launched in November 2018, was founded by two former Ontario Teachers’ Pension Plan managing directors, Steve Faraone and Mike Murray. Jim Leech, the chancellor of Queen’s University and former chief executive officer of the Ontario Teachers’ is chairing Peloton’s advisory board.

The majority of the capital will be invested upfront, with the rest to be available to 123Dentist through an equity line of credit. The funding will go towards supporting 123Dentist’s expansion across Canada and strengthening its back office, marketing and operational capabilities for practice partners.

“When I was at Teachers’, I led the investment in Heartland Dental, which is the largest dental service organization in the U.S.,” says Faraone, a managing partner at Peloton. ”And I really saw, up close, some of the attributes of the dental sector, which I would describe as relatively recession-resistant, stable, good macro trends providing some longer-term growth and then also a very fragmented industry with significant opportunity to buy and build over time.”

The Canadian market is even more fragmented than the U.S. market, he adds. “We view that as quite attractive and we think the model for a dental service organization is quite compelling to dentists because it allows the dentists to focus on providing patient care and having full autonomy to practice their profession and takes a lot of the back office administration and support off their hands and allows them to focus on what they do best.”

Peloton is focused on the middle market and can hold businesses for eight to 12 years. “We’re not required to hold businesses that long, but we do view that ability to be quite a differentiator, especially as you deal with founders and other stakeholders that are looking for a longer-term partner,” Faraone says.

This investment comes after the first close of Peloton’s first fund with $330 million in aggregate commitments. This brings the firm to more than 65 per cent of its fundraising target.

 

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