American Dental Partners acquired by JLL Partners: fairness opinion by Greenhill and BofA Securities
Deal terms
Implied value per share by method vs. $19.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Greenhill to the special committee
Discounted cash flow assumptions
Discounted to present value as of December 31, 2011; assumed net debt of $92 million at 12/31/2011, $0.5 million minority interests, no excess cash, 15.528 million shares outstanding and 2.526 million options at weighted average exercise price of $11.03.
Selected public companies (9)
Alliance Healthcare Services, Inc. · RadNet, Inc. · Metropolitan Health Networks, Inc. · IntegraMed America Inc. · Birner Dental Management Services Inc. · MEDNAX, Inc. · Team Health Holdings, Inc. · Hanger Orthopedic Group, Inc. · IPC The Hospitalist Company, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2011E EBITDA | — | — | — | 5.5x–6.5x | $11.25–$13.84 |
| EV / 2012E EBITDA | — | — | — | 5.0x–6.0x | $11.33–$14.19 |
Selected precedent transactions (6)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2010-08-16 | Prospect Medical Holdings, Inc. | Leonard Green & Partners, L.P. | — |
| 2010-06-01 | Premier Medical Group Ltd. | The Capita Group Plc | — |
| 2004-11-10 | InterDent, Inc. | Levine Leichtman Capital Partners II, L.P. | — |
| 2004-04-26 | Castle Dental Centers, Inc. | Bright Now! Dental, Inc. | — |
| 2004-03-22 | US Oncology, Inc. | Welsh, Carson, Anderson & Stowe IX, L.P. | — |
| 2002-11-27 | Monarch Dental Corporation | Bright Now! Dental, Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (as of 9/30/2011) | — | 6.9x | — | 6.0x–8.5x | $12.62–$19.13 |
| EV / LTM EBITDA - dental industry transactions (median) | — | 6.4x | — | — | — |
| EV / LTM EBITDA - non-dental transactions (median) | — | 7.4x | — | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Present Value of Future Stock Price Analysis | Applied forward EV/EBITDA multiples of 5.0x-6.0x to management forecast EBITDA for 2012-2015 to derive future share values, discounted back to December 31, 2011 at an equity discount rate of 14.5%. | $12.84–$22.31 |
| Leveraged Buyout Analysis | Assumed transaction leverage of 3.75x 2011E EBITDA, exit multiples of 7.0x-8.5x 2016E EBITDA and 5-year IRRs of approximately 20%-25%. | $16.49–$22.97 |
| Premiums Paid Overview | Reviewed 177 U.S. public company transactions announced January 1, 2008 - November 3, 2011 with transaction values of $75-$500 million; median premium 35.0% one-day and 37.0% one-month; for financial buyers, median 28.4% one-day and 29.6% one-month. The $19.00 consideration implied an 84% premium to the November 3, 2011 price and 105% to the October 6, 2011 price. | — |
| 52-Week Trading Range | Closing prices of Company common stock during the 52-week period ended November 3, 2011 ranged from $9.00 to $13.86 per share. | $9.00–$13.86 |
| Analyst Target Stock Price Range | Wall Street research analyst price targets for the Company ranged from $15.00 to $21.00 per share. | $15.00–$21.00 |
Aggregate fee of approximately $6.3 million, of which $150,000 was paid on execution of the engagement letter, $1.75 million paid following delivery of the written opinion, and approximately $4.4 million payable on consummation of the merger. Expense reimbursement and indemnification also provided. Greenhill had not been engaged by or received compensation from the Company or JLL in the prior two years.
Opinion of BofA Securities to the target board
Discounted cash flow assumptions
Standalone unlevered after-tax free cash flows for fiscal years ending December 31, 2012 through 2016, discounted to present value as of December 31, 2011.
Selected public companies (9)
Alliance HealthCare Services, Inc. · Metropolitan Health Networks, Inc. · Birner Dental Management Services, Inc. · RadNet Inc. · IntegraMed America, Inc. · Hanger Orthopedic Group, Inc. · IPC The Hospitalist Company, Inc. · Mednax Inc. · Team Health Holdings, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2011E EBITDA (selected small-cap companies) | 3.1x | — | 6.5x | 5.0x–6.5x | $9.75–$13.75 |
| EV / CY2012E EBITDA (selected small-cap companies) | 2.7x | — | 6.1x | 4.5x–6.0x | $9.75–$14.25 |
| EV / CY2011E EBITDA (selected mid-cap companies, informational) | 7.2x | — | 13.8x | — | — |
| EV / CY2012E EBITDA (selected mid-cap companies, informational) | 6.7x | — | 11.1x | — | — |
Selected precedent transactions (15)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| — | GEDC Super Holdings Inc. | OMERS Private Equity Inc. | — |
| — | Cadent Holdings, Inc. | Align Technology, Inc. | — |
| — | Midwest Dental Holding Company, Inc. | Friedman Fleischer & Lowe Capital Partners III, L.P. | — |
| — | Integrated Dental Holdings | The Carlyle Group / Palamon Capital Partners LP | — |
| — | Smile Brands Group Inc. | Welsh Carson Anderson & Stowe IX, L.P. | — |
| — | Prospect Medical Holdings, Inc. | Leonard Green & Partners, L.P. | — |
| — | Aspen Dental Management, Inc. | Leonard Green & Partners, L.P. | — |
| — | Premier Medical Group Limited | The Capita Group, plc | — |
| — | Bright Now! Dental Inc. | Freeman Spogoli & Co. | — |
| — | InterDent, Inc. | Levine Leichtman Capital Partners II, L.P. | — |
| — | Castle Dental Centers, Inc. | Bright Now! Dental Inc. | — |
| — | US Oncology, Inc. | Welsh, Carson, Anderson & Stowe IX, L.P. | — |
| — | Castle Dental Centers, Inc. | Sentinel Capital Partners, LLC | — |
| — | Monarch Dental Corporation | Bright Now! Dental Inc. | — |
| — | OrthAlliance, Inc. | Orthodontic Centers of America, Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Transaction Value / LTM EBITDA | 5.1x | — | 8.5x | 6.0x–8.5x | $12.75–$19.25 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Leveraged Buy-Out Analysis | Assumed December 31, 2011 closing, total debt to CY2011E EBITDA of 3.5x, exit multiples of 6.5x-8.5x CY2016E EBITDA and financial buyer IRRs of approximately 20%-25%. | $15.25–$23.00 |
| 52-Week Trading Range (informational) | Closing prices during the 52-week period ended November 3, 2011 ranged from $9.00 to $13.86 per share. | $9.00–$13.86 |
| Analyst Price Targets (informational) | One-year forward Wall Street analyst price targets discounted to present value over an illustrative one-year period. | $13.32–$18.64 |
Aggregate fee currently estimated at approximately $6.3 million, of which $1.25 million was payable upon rendering of the opinion and the balance contingent upon consummation. BofA Merrill Lynch and affiliates previously provided banking services to the Company (~$2 million in fees over prior two years) and to JLL majority-owned portfolio companies (~$7 million over prior two years).
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $323M | $368M | $424M | $486M | $553M | 14.4% |
| Revenue growth | 10.2% | 13.9% | 15.2% | 14.6% | 13.8% | |
| EBITDA | $54.0M | $65.0M | $81.0M | $100M | $118M | 21.6% |
| EBITDA growth | 10.2% | 20.4% | 24.6% | 23.5% | 18.0% | |
| EBITDA margin | 17% | 18% | 19% | 21% | 21% | |
| Implied EV / EBITDA | 7.4x | 6.1x | 4.9x | 4.0x | 3.4x |
Year-1 growth is against LTM at announcement ($293M revenue, $49.0M EBITDA); later years are year over year.
Management's long-range plan projections for 2011E-2016E were provided to the Special Committee, the Board, both financial advisors and the Buyer. Total net revenue was projected to grow from $293 million in 2011E (existing operations $287 million, de novo $6 million, acquisitions $0) to $553 million in 2016E (existing operations $333 million, de novo $145 million, acquisitions $74 million). EBITDA was projected at $47 million in 2011E rising to $116 million in 2016E (Adjusted EBITDA, including stock-based compensation add-back, of $49 million to $118 million), with capital expenditures (including acquisition-related) of $(28) million in 2011E to $(54) million in 2016E. The forecast was heavily dependent on acquisitions and de novo facility development.
Process notes
Other Professional Services fairness opinions
- IntegraMed America / Sagard Capital Partners 2012 · 8.5x EV/EBITDA
- Pet DRx / VCA 2010 · 9.8x EV/EBITDA
- Birner Dental Management Services / Mid-Atlantic Dental Partners 2018 · 21.9x EV/EBITDA
All Professional Services opinions → · Greenhill opinions · BofA Securities opinions