Dental implant company MIS Implants Technologies, which obtained a substantial investment only from private investment fund TA Associates (as did Alma Lasers) has been sold to Dentsply Sirona, a global dental implant company with a $14.5 billion market cap, for $375 million, one of the biggest exits in medical devices in Israel in recent years. Poalim Capital Markets, in cooperation with William Blair, provided advice for the deal.
MIS, which had $80 million in revenue at the time of the acquisition, was founded by senior VP marketing and development Doron Peretz and Eitan Peretz, two brothers from Shlomi. Their father, Asher Peretz, owned a small chip processing plant, and they essentially followed in his footsteps, specializing in dental implants. The venture developed and became a partnership in equal shares between the Peretz brothers and the Hirsch family, former owners of Noga Engineering, another chip processing company from Shlomi. Initially, the dental implant unit was only part of the company's business, but it later overshadowed the other business, and became MIS's sole activity.
The company started making a profit and financing itself in 2011. At that point, TA Associates bought a 40% stake in the company at an estimated company value of $150 million. This money was apparently not put into the company; it was taken by the entrepreneurs and investors, and the company continued to finance itself. The entrepreneurs seem to have benefited from two exit rounds, raking in $280 million, divided among them.
The company has a large advanced production facility in the Bar Lev industrial zone near Karmiel. MIS has 260 employees in Israel in a variety of departments (not to mention a few robots on the production line). 160 more employees work in the company's overseas subsidiaries, focusing on marketing - making a total of 420 employees.
"Strong brand name"
CEO and former Elbit Vision Systems Ltd. (Bulletin Board: EVSNF) senior executive Idan Kleifeld has managed MIS for 12 years. He told "Globes," "From the beginning, the company's advantage was its implants business at value prices. These are not the cheapest implants made by most of the Israeli implant companies, nor are they the most expensive, like the ones made by the company that acquired us - Dentsply. We're the market leader in our category."
"Globes": What is special about your products themselves?
Kleifeld: "In recent years, we have gone to market with a patent from two Israeli dentists - a triangular implant, not a round one, which leaves more room for the bone to renew itself and grow around it. In addition, we developed a system for digital planning of the implants' location. We print a personalized model according to X-rays of the patients' teeth, and the dentist aims the implant through the model at exactly the right place."
How did Israel become a dental implant power?
"The penetration ratio for dental implants in the Israeli market itself is the highest in the world, meaning that many Israelis have implants - the most per capita in the world. Implants are for both medical and esthetic purposes. The need in the market caused young companies to arise here, but the Israeli market is limited, so when those companies were trying to grow, they had to look outside Israel. Those who were successful built international activity for themselves. There was no connection between the leading Israeli companies in this sector and no groups that opted out in order to found new companies (as happened in the medical esthetics sector, G.W.). The focus and success in this field happened because of the market structure, and because Israelis are innovative, and think and move quickly."
For many years, the dental implant market has been a rather unromantic industry, and it was therefore easier for new and innovative parties to make headway in it than in other sectors. This is no longer the case - the market has joined the digital age, the leading companies in it have undergone a process of consolidation, and the leading companies' market values are soaring. "We're almost the only independent company left," Kleifeld says. That is probably one of the reasons for the high price the company obtained from its buyers, added to the fact that the value segment in which the company operates is growing faster than the discount and premium segments.
You said that Israelis are good at innovation, but they are usually less successful at industrial production and marketing, in which you have succeeded.
"That happened with a lot of thought and planning ahead. Fortunately, we made a profit, and were able to invest in making the business grow. We have a beautiful factory full of automation, and we have always sold directly under our brand name. Some of our distributors are owned by us and some are franchise holders, but even the distributors we don't own are called MIS, and they sell our products exclusively."
What will happen to the company now?
"We expect to continue as a separate unit in Dentsply, with all of our personnel, because we have highly developed production capabilities and a strong brand name."
A different era
There are a few other medical device companies in Israel that are actually industrial companies: Elcam Medical, Degania Silicome, TAG Medical Products, and some others. Is this actually the right way to build a medical device company in Israel, despite the riskier option we see among companies relying on a single significant innovative product, raising venture capital, and trying to rapidly revolutionize the market, which usually fail at the penetration stage? The answer is yes and no.
Industrial companies built from below avoid a large part of the problems faced by startup-like companies, because they usually begin the penetration process from sectors in which expensive clinical trials are not required, their investors are not in a rush to make an exit, and the company can grow gradually, and also become more innovative as time passes.
All the above-mentioned companies, however, were founded two or three decades ago, when the medical devices market was a little different. Today's market is concentrated, technological, and digital almost throughout, and it is very difficult to develop gradually like this. The quiet private companies sold in recent years for hundreds of millions are the product of a different era.
Published by Globes [online], Israel business news - www.globes-online.com - on June 28, 2016
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