A private equity firm is considering buying a regional chain of dental clinics. How would you assess the deal?

Two things I'd want to know first. Is this a platform they'd add more clinics onto, and what holding period and return are they aiming for? I'd assess it in four parts. First, the market. Is dental care in this region growing, and does it hold up in a downturn? Second, the business itself. I'd look at revenue, costs and growth. The biggest question is the dentists, and whether they stay after a sale. Third, where the value comes from after the deal. I'd want to see what the fund can improve that the current owners can't. Fourth, the price and the exit. Is the price fair and who would buy it later? I'd run the returns at the asking price and see if they clear the fund's target. I'd start with the business itself. What financials do we have?

Two things I'd want to know first. Is this a platform they'd add more clinics onto, and what holding period and return are they aiming for? I'll assume it's a platform deal with a five-year hold, and they need about two and a half times their money. I'd assess it in four parts. First, the market. Is dental care in this region growing, and does it hold up in a downturn? Dentistry is still mostly small independent practices, which is the reason a roll-up can work. So I'd check how many practices in the region are for sale and at what prices. Second, the business itself. I'd look at it clinic by clinic. That means revenue per chair, the split between insured and self-pay patients, and how much comes from higher-margin work like implants. The biggest question is the dentists, and whether they stay after a sale. If a few of them bring in most of the revenue and can walk away, we're buying less than it looks. Third, where the value comes from after the deal. I'd want to see what the fund can improve that the current owners can't. I'd size three levers. One is buying more practices at a lower multiple than the chain itself is worth. Then shared purchasing and back office, and filling empty chair hours. I'd rank them by how sure we are of each. Fourth, the price and the exit. Is the price fair and who would buy it later? I'd run the returns at the asking price and see if they clear the fund's target. I'd only count the levers I trust. My hypothesis is that the deal works only if the roll-up math works and the dentists stay. So I'd start with dentist contracts and revenue by dentist. Can we get those?