myOrthos has been sold to Smile Doctors, a portfolio company of Thomas H. Lee Partners and Linden Capital Partners

myOrthos

myOrthos is an operator of an Orthodontics Services Organization (OSO) intended for orthodontists and supporting teams, primarily in the eastern half of the United States. The company has 73 orthodontists across 13 states providing clinical care and essential back-office support functions.

The Deal

The OSO industry, a subsector of the Dental Services Organization (DSO) market in the U.S., is a niche market with a select number of scaled assets. Lincoln crafted a targeted marketing process, focused on attracting interest from OSOs and large multispecialty DSOs that could absorb an asset of this size into its existing footprint and infrastructure. Through this competitive process, Smile Doctors emerged as the optimal acquirer based on its national scale, experience in integrating practices, capital and strategic backing and joint venture model to drive upside for myOrthos’ orthodontist partners.

This is a first-of-its-kind transaction, as myOrthos’ sale to Smile Doctors is the first OSO of scale to be sold to another OSO platform in the U.S. Both teams worked through unique financial, operational, regulatory and tax considerations to cement Smile Doctors’ position as the leading OSO while expanding their coverage in four additional states.

Challenges that Lincoln overcame during the transaction:

1. Complex Healthcare Services Market: Lincoln navigated the complexities of a challenging healthcare services market to identify the optimal buyer, focusing on strategic acquirers who aligned with the unique dynamics and operational needs of the practices’ physician base, ensuring continuity and long-term success.
2. Doctor Alignment: To drive satisfaction for myOrthos’ orthodontist partners through this sale process while also ensuring alignment with the longer-term equity vision under Smile Doctors, we facilitated multiple “working group” sessions for orthodontists to ask questions and get to know the new OSO in both group settings and through individual meetings. Given the number of orthodontists involved with this transaction, we maintained consistent and transparent communication while fostering interactions with the buy-side team.
3. Integration Complexity: Historically, Smile Doctors has purchased orthodontic practices as individual acquisitions with a defined operational playbook leading up to and immediately following acquisition. By acquiring 73 orthodontic practices from myOrthos at once, we had to accelerate the integration process, leveraging a Transition Services Agreement (TSA) to provide ongoing support to myOrthos practices and execute preliminary “hand-off” work while also executing confirmatory diligence.

Regulatory Considerations: We took several legal precautions to ensure compliance with state and federal laws to protect Smile Doctors, as well as myOrthos, from any potential future regulatory risk given the number of state-level entities involved in this transaction and the Medicaid dynamics of select myOrthos practices.

Our Perspective

“Lincoln is proud to be a part of the first-ever sale of an OSO of scale to another OSO in the U.S. Delivering an exceptional outcome for the myOrthos orthodontists by providing an opportunity to reset with the leading player in the space, while also enabling their teams to enhance the quality care they provide to their communities, makes this a landmark transaction for us,” commented Brendan Murphy, Lincoln International Managing Director who led the transaction.

“We are delighted to have closed another dental specialty transaction in what has been a challenging healthcare services mergers and acquisitions market. With over 40 DSOs brought to market in the past few years, this deal stands as one of the handful to successfully close, highlighting Lincoln’s ability to deliver strong outcomes for our clients,” commented Moyo Mamora, Lincoln International Director who covers the dental sector.

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