Gryphon Finds Bright Now! Exit –

The oral care space has seen its share of suitors in 2005. In April alone, Linden LLC, Fidelity Capital and Great Spirit Ventures all completed deals in the sector. Gryphon Investors, meanwhile, in May was able to capitalize on this renewed vigor, and sold off a majority stake in Bright Now! Dental Inc. through a $340 million sale to Freeman Spogli & Co., another LBO shop apparently keen on dental trends.

Gryphon had been an investor in Bright Now! since 1998, when it created the company through merging three existing West Coast dental practices into one business. Published reports put the original purchase price at around $30 million. In 2003, Gryphon acquired Monarch Dental Corp. and last year completed another add-on, buying Castle Dental Centers, which was also owned by a private equity shop. Today, the combined company controls almost 300 dental practices and maintains a presence in 19 states.

“Compared to other sectors, the demographics in oral care are very strong,” Gryphon Partner Kurtis Kaull said. “It’s an $80 billion a year industry and it’s growing somewhere between 8% and 10 percent.” Kaull further noted that the $80 billion he referred to does not even include the “unaddressed market” of people who do not currently spend money on dental services but could in the future.

During Gryphon’s ownership, Bright Now! has grown from $30 million in annual revenues to $350 million today. The company’s EBITDA has reportedly expanded from roughly $7 million a year to approximately $37 million.

While the numbers belie a smooth plane northward for Bright Now!, Kaull noted that creating growth wasn’t quite as simple as just sewing together the new add-on deals. “There are some pretty simple drivers to this business, but right out of the box, we made the original platform investment and put together two more deals very quickly, so the integration process was actually pretty challenging,” he said.

Kaull added that following the initial acquisitions, the company spent the next couple of years formulating a business model to integrate the three acquisitions. Then, only once the platform started showing organic growth in both revenues and EBITDA, Bright Now! resumed its acquisition strategy.

Gryphon would not comment on the returns generated through the sale. The firm invested in the company out of both its first and second funds, and in 2003, according to Form D filings with the SEC, took some money back through multiple dividend recaps. Gryphon is maintaining a minority stake in the company.

Freeman Spogli, meanwhile, will invest roughly $130 million of equity in the acquisition, and has tapped Antares Capital Corp. for the debt financing, which is taking the form of a $212.5 million senior credit facility.

Going forward, Kaull noted that Freeman Spogli’s retail track record should help Bright Now! in its next stage of growth. “This is a retail model… Freeman Spogli really makes sense because of their track record with multi-site retail concepts,” he said.

UBS Investment Bank served as the financial advisor to the selling party, while Latham & Watkins LLP served as legal counsel. O’Melveny & Myers represented Freeman Spogli.