There's a New COR for AppleWhite Dental Partners

In April of 2017, CORDENTAL Group, a start-up with six locations under consideration in the Mid-Atlantic, made Group Dentistry Now’s “Emerging Dental Groups to Watch Now” list. At that time, we reported that they had an aggressive growth plan of affiliating with 50-75 practices over the next three to five years. The group’s founders, Dana Soper and Steven Jones, both pharmacists, were told by many that they could not be successful DSO owners.

Fast forward to today, and the small dental group with 13 affiliated practices has just acquired the much larger AppleWhite Dental Partners, including their network of 35 offices, 50 dentists, and 350 employees, which serve nearly 185,000 patients annually. Founded by Dr. Tom McCoy in 2009 and headquartered in Dubuque, Iowa, AppleWhite is a DSO with locations in Iowa, Illinois, Wisconsin, and Minnesota.

“Our vision for CORDENTAL was to become one of the leading DSOs within our geographic footprint. Just under two years from our inception, we are achieving that goal and are very excited to have the AppleWhite family join us as we continue building density within our markets.” -Steven Jones, Co-Founder & Chief Development Officer, CORDENTAL

THE COMPETITION
After reaching their target size, AppleWhite’s private equity partner, Tonka Bay Equity Partners, decided they were ready to move on from their investment. For them to get to the next level and become a real player in the DSO market, AppleWhite needed to improve resources and increase talent. As a result, they went to the market. And what they found was a very competitive market, with serious interest from both financial and strategic buyers. The competition to buy the platform ranged from very large groups, to smaller groups such as CORDENTAL, and private equity.

AppleWhite’s footprint was the top reason for the competitive interest, as well as their general financial state and maturity. As a mid-market DSO, potential financial buyers saw it as a platform that could grow. The larger, strategic buyers, aggressively looked at the opportunity because AppleWhite appeared to be a natural fit for their organizations.

THE MATCH
CORDENTAL’s story is very similar to AppleWhite’s. Both are relatively young, and in the end, it was all about cultural fit. The executives at AppleWhite were quite impressed with Steven, Dana, and their entire team. AppleWhite found that together with CORDENTAL, the whole was greater than the sum of its parts. With the other competitors vying to buy AppleWhite, it was business as usual. To AppleWhite it seemed that they wanted them to just keep growing as they were with their previous financial buyer. The culture fit was just not there like it was with CORDENTAL.

“I didn’t take the highest price. I took the best fit for the company. I think that sets us up to become not just a regional player, but a national player down the road.” – Dr. Tom McCoy, Founder, AppleWhite Dental Partners

The DSO industry has its challenges which include maintaining good talent and margins. In the Midwest, the markets’ population size is not as significant as some of the other, more densely populated parts of the country. Therefore, finding talent can be a challenge. As a result, recruitment efforts are constantly ongoing.

“From the start, being a founder, I can remember what it was like to try to get critical mass and overcome that. Our financial backers helped us to overcome it a few years ago. There are emerging DSOs with five, six, seven locations, and that’s the tipping point for many. If they can get through that, they tend to make it. And if they don’t, they sort of get swallowed up. Overcoming that tipping point was the biggest moment for us. This acquisition will get CORDENTAL past that tipping point.” – Dr. Tom McCoy, Founder, AppleWhite Dental Partners

THE PROCESS
It was a very quick diligence process. From the time AppleWhite got the letter of intent, and subsequently accepted that letter of intent, the entire diligence process took 60 days. The speed and ease is a credit to both sides.

Focusing energy, being organized, and having NMS Capital included in the entire process helped ensure it was done in a timely manner. Leaning on their private equity investors was imperative to CORDENTAL because of the size of the deal. NMS Capital helped everything fall into place agreeably and swiftly.

“I would say that the process itself was relatively smooth. I was very impressed with CORDENTAL and their financial buyers, as far as their understanding of the DSO world. It made it a lot easier to speak intelligently with them that way. I would talk to some financial buyers who, at times, didn’t understand the industry very well.” – Dr. Thomas McCoy, Founder, AppleWhite Dental Partners

THE FUTURE
Despite rapidly growing to 50 practices doing $65 million in revenue annually, there are no signs that CORDENTAL is slowing down, as they plan to continue their acquisitions with a full pipeline. In fact in mid-June 2019, they acquired Burks Dentistry, which is led by Dr. James “Jim” Burks, in Madison (Nashville), TN. Their ‘number of locations goal’ may have changed, it is now doubled from their original goal, but what remains unchanged is their desire to build a great company, which was paramount for them from the start.

From the outset, it was important to the founders to build CORDENTAL from the ground up, with solid processes and policies in place. They’ve integrated all of their practice locations from a platform-management standpoint providing standardization. They built infrastructure up front, investing a great deal of time and energy into putting their team together, ensuring they were well-staffed and well-positioned to take on an acquisition of this type. Otherwise, they wouldn’t have been able to take this giant next step.

AppleWhite, on the other hand, has not done a great deal of integration, but have been in business for a number of years and have grown a great company that will benefit from CORDENTAL’s strong infrastructure.

The integration process, which will be led by a team comprised of employees from both groups, will take up to a year to complete. They’re going to share ideas, look at how one another’s been doing things, and determine best practices for the entire organization. Dr. McCoy and Jeff Mentzer, CFO of AppleWhite, are critical to the group’s long-term success and integration process.

AppleWhite is generally non-branded. They do have a few practices that go by the AppleWhite name that were either start-ups or practices where the doctor retired. For the most part, they are an acquisition model, just like CORDENTAL. The practice sites will remain with the same names and legacies that they had before. None of that will change. But the management company, the DSO, will ultimately be CORDENTAL GROUP.

“AppleWhite marks our twelfth, and most significant, affiliation in less than two years since we founded CORDENTAL. AppleWhite provides CORDENTAL with significant scale and meaningful density in markets contiguous to our existing footprint. AppleWhite’s reputation in the Midwest market is unparalleled and we feel the alignment between our two organizations with respect to culture, values and approach to working with providers makes this partnership incredibly compelling. We are excited to begin our partnership with Dr. McCoy and his team.” – Dana Soper, Co-Founder & CEO, CORDENTAL

Steven Jones

Long-term, Dr. McCoy is going to be involved in the clinical arm of the organization. He already has a mentoring program for new associates, which involves training, quarterly meetings, monthly phone calls, and visits to the site, which he will continue and expand upon. In addition to clinical development, Dr. McCoy will also be involved in assisting Steven Jones with business development. Jeff Mentzer will also be working under Steven Jones to continue to grow their pipeline.

(l to r) Melissa Park, SCP HR, Dana Soper, Jeff Mentzer SVP Business Development (former CFO AppleWhite), Dr. Tom McCoy, SVP Clinical Business Development (former CEO AppleWhite), John Walker Cordental CFO, Ken Kollmann, SVP Operations. (Steven Jones not pictured.)

Learn more about CORDENTAL:

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