The Australian Financial Review newspaper is today reporting Sydney dentist and entrepreneur Dr David Penn has sold a majority stake in his business Southern Cross Dental Laboratories to a private equity company in a deal worth nearly $100 million.
The article said that Penn will remain chief executive of the business he started nearly 30 years ago while private equity player Ironbridge Capital takes a 60 per cent stake.
Under the deal, Southern Cross is valued at $95 million, including debt, which is an estimated six times earnings before interest and tax.
By the time he finished dentistry Penn was very focussed. “I got my results on Friday afternoon 13 December 1978. I had my own practice on Monday December 16,” he said in an interview with Bite magazine recently.
“I remember I had to pay $756 a month, which back in 1978 was a lot of money. But it never fazed me. I guess I must have had some of this self-belief. But I was reasonably confident with my clinical skills. I think I had been well taught at Sydney University. I went straight in and started working very hard, very quickly. I remember taking my first day off, for my birthday, three months later and my mother saying ‘what are you doing?’”
By September 1983 with the second practice going well Penn began to get interested in mail order businesses. “I saw a lot of mail order catalogues. They were selling stuff without having a shop. I was fascinated with that business model. You’re taking a labour component out, you’re taking rent and a shopfront out so what you’re dependent on is the quality of the merchandise you’re selling, the prices and the way you market.”
He wondered how he could transpose that business model into dentistry? Penn flew to Hong Kong and formed relationships with a couple of dental laboratories there. Working out of his mother’s second bedroom, surrounded by textbooks on mail order businesses, he set up Southern Cross Dental Laboratories.
“While the concept was great there were a lot of problems. There were no fax machines, there was no internet.” Then in 1990, having already begun dental education trips for dentists to Hong Kong and China, Penn strengthened Southern Cross Laboratories by forming an alliance with Hong Kong University. This set him up for a most fortuitous circumstance when in 1997 Hong Kong reverted to Chinese rule. “When the takeover occurred a lot expats were encouraged to leave positions of long tenure in universities. A lot of people who were very talented in the dental technology area no longer had jobs. Then the university decided they didn’t want a school of dental technology. We seconded a huge number of the best quality technicians and experts, commercialised them and put them under one roof.”
TheSouthern Cross empire now extends to New Zealand, England, Ireland and the US.
Still, throughout all this expansion and the establishment of other businesses including a series of emergency dental clinics and chain of teeth whitening clinics, Penn has continued to practice dentistry in the same practice he started, albeit moved after 18 years to Double Bay. “Because I’m selling dental products in the laboratory I can do a lot of R&D on the products,” explains Penn. “We can be so innovative in our approach. We’ve got a lot of new things happening built around stuff I’ve created.”
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