Taking a Deeper Look at KKR's Investment in Heartland Dental, the largest DSO in Country (with timeline)

Heartland Dental, the largest dental support organization in the United States, announced that it has entered into a definitive agreement whereby KKR will acquire a majority interest in Heartland from Ontario Teachers’ Pension Plan and other existing shareholders. Under the terms, Ontario Teachers’ will retain sizeable ownership and will continue as a significant partner to the company. Heartland Dental’s Founder and Executive Chairman Dr. Rick Workman, President and CEO Patrick Bauer, as well as supported dentists and employees will also remain significant shareholders.

Founded in 1997, Heartland Dental provides non-clinical administrative support services to supported dental offices representing a network of over 1300 dentists. Heartland Dental’s mission is to support dentists and their teams as they deliver the highest quality dental care and experiences to the communities they serve, while also providing exceptional careers and creating value for all stakeholders.

Some important points to note about this investment and the OTPP investment:

This investment is only the second majority equity event in the company’s 20-year history. In November 2012, Ontario Teachers’ was the first outside investor to take a majority position. At the time, Heartland Dental’s network consisted of 397 supported practices throughout 21 states. Today, Heartland Dental boasts a workforce of 11,000 employees who serve more than 840 supported dental practices across 35 states. Supported practice annual revenues stood at an estimated $1.3 billion at the close of 2017, which is a 126 percent increase in the five years since Ontario Teachers’ acquired its majority stake.

Another important aspect to know is that KKR is making its investment in Heartland Dental through its Core Investments strategy fund, a newly created fund that is focused on a longer term investment strategy than typical private equity funds.

“It has been an honor to work with Dr. Workman and the rest of our doctor partners, and we look forward to remaining a significant shareholder of Heartland Dental. Our institutional expertise investing in physician-led healthcare services businesses helped Heartland Dental more than double the number of supported dental offices and firmly establish it as the premier provider of dental support services in the United States. We welcome KKR as a partner to the company as it continues its growth trajectory as the leading provider of practice support services.” – Jane Rowe, Senior Managing Director, Private Capital at Ontario Teachers’ Pension Plan

Jefferies LLC acted as exclusive financial advisor. Weil, Gotshal & Manges LLP and Ropes & Gray LLP acted as legal advisors to Heartland Dental. Simpson Thacher & Bartlett LLP served as legal counsel to KKR. Fully committed debt financing will be provided by Jefferies, LLC and KKR Capital Markets.

Timeline

1980 – Dr Workman opens first practice in Effingham, IL

1982 – Dr Workman hires first associate dentist

1992 – Dr Workman extends first partnership

1997 – Pat Bauer hired as COO

2000 – Company affiliated first practice management group: Mid South Dental Partners in KY, IN and TN (8 dental offices)

2003 – Named #377 on Inc. 500 list

2003 – The Institute at Heartland Dental Care opened

2003 – Launched first issue of Smiling Magazine

2003 – Dr. Workman named Ernst & Young’s Entrepreneur of the Year

2009 – Pat Bauer named President

2009 – Hired 2,000th Employee

2011 – Hired 3,000th employee

2011 – Affiliated with Neibauer Dental Care, a group practice with 26 offices across VA and MD

2011 – Affiliated with 300th dental practice

2012 – Established Ontario Teachers’ Pension Plan (OTPP) as investment partners

2012 – Doubled the size of their HQ to 80,000 sq. ft. in Effingham, IL

2013 – Affiliated with 400th dental practice

December 2015 – Heartland Dental hits the 700 practice mark. Read HERE.

January 2016 – Heartland Dental makes the Top 5 Dental Support Organizations to Watch in 2016 list. Read HERE.

February 2017 – Heartland implements the Doctor Mastery Program. Read HERE.

October 2017 – Today’s Family Dental in Waco, Texas becomes the 800th practice supported by Heartland Dental. Read the story HERE.

“We are thrilled to secure the backing of KKR as we carry out our vision to be the leader in dentistry,” said Mr. Bauer. “Their investment, along with the continued involvement of Ontario Teachers’, is the ultimate validation and vote of confidence that our leadership team and workforce are optimally positioned to achieve our growth objectives.”

“During this process, it was important for us to find an investor that was aligned with our core values and doctor-led culture,” added Dr. Workman. “We found that alignment with Ontario Teachers and know that it will continue with KKR.”

“Heartland Dental has established itself as the premier dental support organization with an unwavering commitment to supporting dentists. Heartland Dental management and KKR share a common vision to continue the proven track record of growth and supporting dentists to help them provide high-quality dental care to communities nationwide.” – Jim Momtazee, Member of KKR and Head of KKR’s Heath Care investment team

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