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Medit exits the PE route with US based Carlyle Group



Deal market at a glance:


  • insightsZ estimates that the total deal value of PE and M&A transactions in the dental space has exceeded USD 5 billion in FY 2022.


  • Strategic deals (including both corporate deals and add-ons) witnessed value reaching USD 1.5 billion, a 2X increase over FY 2021, despite the softer macro backdrop.


  • insightsZ outlook for strategic deal activity in Q1’23 remains conservative as companies scramble to focus on earnings. High inflationary pressures and evaporating consumer demand are exerting pressure on margin compression, negatively impacting topline as well as bottom-line performance alike.


  • Even though PE and M&A activity rebounded to an all-time high in FY 2022, valuations multiples have declined.


  • Technology space, clear aligner category and DSOs together account for more than 80 percent of the total deal value YTD’22. GPs continue to invest in above categories because of their long-term disruptive potential, even in the wake of macro headwinds.


  • The two powerhouses of the global dental industry space namely, intraoral scanner category and clear aligner category, have witnessed negative revenue growth rate by 12% and 13% in Q3’22 respectively (versus Q3’21).


  • FY 2022 witnessed significant participation not only from corporate buyers, but also PE groups as well as add-on deals (in which investors buy and combine multiple platform assets to create scale like DSOs).


  • SPACs, which were all the rage in FY 2021, have ceased to exist as an exit platform, especially in the face of changing market conditions and regulatory framework.


  • Large cap dental manufacturers are worried about earnings and a potential looming recession – effectively pulling back from the M&A markets. Any dental manufacturer or strategic buyer is pricing a recession late in 2022 or early in 2023 as part of their base case underwriting scenarios – which further reduced the attractiveness of M&A deals.


  • Decline in Public Markets: The largest global dental manufacturers (exceeding market cap USD 4 billion) are down LTM. With the exception of Basel-based Straumann Holdings, almost all large cap manufacturers grew negatively on organic basis sequentially, as well as on YoY basis.




M&A and PE deal activity in Intraoral Scanning Space


For much of the last decade, PE firms and corporate buyers have focused increasingly on growth-oriented investments in the dental space. However, global macro headwinds incl. rising interest rates and evaporating consumer demand have initiated a shift from “growth-at-all-costs” investment strategy to a more value-oriented investment thesis.


Based on a recent EY report, PE firms are still sitting on more than USD 1.4 Trillion in dry powder in FY 2022 – which partially explains why deal activity still continues to be quite robust, even in the face of a softer macro environment. FY 2021 Pent-up M&A activity was a strong tailwind during early quarters of FY 2022, however that has changed as we progressed towards H2’22.


In Mainland China, leading PE groups and corporate buyers are out on a global shopping spree. Q1’22 Hong Kong based CareCapital Group made a series of transactions in North American and European clear aligner market space. Not just that, just few weeks back, Angelalign Inc. announced its plans to acquire Aditek Orthodontics, a leading player in Brazilian orthodontics space, in a deal valued at USD 19.4 million.


Broadly speaking, the global intraoral scanner category has witnessed two significant deals in FY 2022:


  • Carestream Dental’s intraoral scanner business unit (now DEXIS) acquired by Envista Holdings (NYSE: NVST) in a deal valued at USD 600 million. The deal was announced in Dec 2021, but was successfully closed in Apr 2022.

  • Medit Corp’s, which has been up for sale, would soon be acquired by the Carlyle Group and Korea-based GS conglomerate in a transaction valued at USD 2.1 billion.


Medit Corp. Acquisition Deal


Previous Financing Rounds & Exit


  • FY 2019 Medit Corp. was valued at USD 315 million. Back then, the Korean manufacturer was considering going to public markets to raise financing. However, soon after some initial consideration, any plans for an IPO were dropped and the company’s management decided to look for growth investment from PE and investment groups.


  • Fast forward to FY 2020, Japan-based PE Group Unison Capital Inc. invested USD 268 million – acquiring a 50 percent equity stake in the company, and effectively valuing the Korea-based entity at USD 536 million. The financing round saw the participation of world’s leading investment banks and private equity groups incl. Carlyle Group, KKR among others to grab a stake in the company’s ownership – yet the Japanese PE group Unison Capital emerged as the deal maker.


  • FY 2021 M&A activities in the dental space had bounced back to record high levels. Q4 2021 an enterprise-wide IPO readiness assessment revealed that a trade sale (‘strategic’ M&A transaction) would be the best bet for a successful exit.


  • July 2022, it was announced that Medit Corp is up for sale and the obvious thought was that corporate buyers (strategic investors) would line up for the deal. Medit hired Citigroup Global Markets to look for buyers and enable the deal making. Recently, it was announced that Medit Corp will now be sold to the US based PE Carlyle Group and South-Korea based conglomerate GS group for USD 2.1 billion.


  • While one may marvel at Medit’s ambitions and Citibank’s experience at deal making, nevertheless the acquisition deal value (USD 2.1 B) is 30 percent less than what Unison Capital and Medit’s current ownership were hoping to get.


  • A quick glance at the company’s financials and it’s clear that the Japanese PE Group Unison Capital has achieved outstanding returns on the deal - generating 3.9 X returns in as little as 30 months.



insightsZ Testimony


Unlike 3Shape A/S growth investment by EQT Group wherein the Danish manufacturer was seeking an investment to turbocharge their growth, Medit’s founder as well as Unison Capital will be exiting the business completely. One may definitely argue that one of the PE Groups’ core capabilities lies is selling companies, so 3Shape’s A/S may be looking at attempting to sell the business in a mid-term horizon.


Concerning Medit’s acquisition deal, the timing of the transaction made it difficult for the Korea-based company to create a choice of buyers for possible M&A exit. Many prospective strategic buyers were worried about earnings and a potential looming recession – effectively pulling back from the M&A markets. Not just that, most dental manufacturers are pricing a recession late in 2022 or early in 2023, staying away from M&A activity till market conditions stabilize. Summarize: insightsZ believes that bad timing, combined by softer macro backdrop forced the possible M&A takers to be distracted. Please note that the South Korean conglomerate GS Group secured the right to buy Medit when Carlyle Group sells its 90 percent stake in the company.


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