(Bloomberg) -- One of the richest dentists in the U.S. hasn’t seen a patient for more than two decades.

Richard Workman, 63, stopped practicing in 1996 to build his company, Heartland Dental, into a kind of Walgreens for the dentistry business. He scooped up one dentist office after another, and today Heartland has more than 800 in 36 states, making it the largest dental management company in the country.

Workman’s empire-building caught the eye of KKR & Co. In April, the private equity powerhouse bought a 58 percent stake that valued Heartland at a rich $2.8 billion, the latest in a series of acquisitions in the industry. Other Wall Street investment firms -- from Leonard Green & Partners to Ares Management -- are also drilling into dentistry to see if they can create their own mega chains.

"It feels a bit like the gold rush," said Stephen Thorne, chief executive officer of Pacific Dental Services. "Some of these private equity companies think the business is easier than it really is."

The nitrous oxide fueling the frenzy is credit. Heartland was already a junk-rated company, with debt of 7.4 times earnings before interest, taxes, depreciation and amortization as of last July. KKR’s takeover pushed that to about 7.9, according to Moody’s Investors Service, which considered the company’s leverage levels "very high."

Investors were so hungry that they accepted lenient terms in providing $1 billion of the leveraged loans that back the deal, making investing in the debt even riskier.

Corporate dentistry has come under fire at times for pushing unnecessary or expensive procedures. But private equity firms say they’re drawn by efficiencies the chains can bring to individual dental practices, which these days require sophisticated marketing and expensive technology. The overall market for dental services is huge: $73 billion in 2017, according to investment bank Harris Williams & Co. Companies such as Heartland pay the dentists while taking care of everything else, including advertising, staffing and equipment.

Less than 10 percent of dentists are affiliated with corporate-backed practices, according to the American Dental Association, so advocates expect a lot more consolidation and private investment to follow.

"Look at what happened to pharmacy and it’s going to go that way in dentistry," Workman said. "We can be where Walgreens is in 20 years."

The KKR deal left Workman with a 10 percent stake in the company, valued at about $170 million. Real estate holdings boost his total net worth to approximately $400 million, according to data compiled by Bloomberg. Workman declined to comment on his net worth.

Boosting Stakes

Other investors in dental practice include Berkshire Partners, which in 2015 bought a stake in Affordable Care, a Raleigh, North Carolina-based dental company with more than 200 offices. Last year, Ares and Leonard Green increased their ownership of Aspen Dental Management, a dental organization in an East Syracuse, New York with more than 650 practices.

Even small companies are attracting attention.

Alan Acierno worked at a Heartland practice until he and his brother started DecisionOne Dental Partners, which now has 24 locations in Illinois. He gets calls from private equity shops every other week looking to invest.

Acierno said their pitch is that “you can sell it and make a lot of money.”

Investors can, too. The Ontario Teachers’ Pension Plan has seen the value of Heartland more than double since it invested in 2012. It sold a big chunk in the KKR deal and still holds a minority stake.

Keeping Control

Thorne, founder and CEO of Pacific Dental, which has more than 600 practices in 20 states, isn’t convinced. He hasn’t taken investment from private equity, saying he wants to maintain control. But he’s also concerned that a private equity stake would involve taking on too much debt.

"There could be a slowdown in the economy or change in the regulatory environment, or who knows what could happen," Thorne said. "That could be difficult to meet those debt requirements."

Debt gave Workman his start. After graduating from Southern Illinois University School of Dental Medicine in 1980, he borrowed $35,000 to purchase a two-chair practice in Effingham. He went on to buy about one new practice a year through the 1980s and in 1997 launched Heartland. For a dentist coming out of school with big loans, joining a company can be more attractive than setting up a practice.

Heartland sold a minority stake of the business to Chicago-based private equity firm CHS Capital in 2008, four years before Ontario Teachers’ took a majority stake.

Unnecessary Procedures

Corporate dentistry has its critics. In 2013, a U.S. Senate committee found that some company-controlled dental clinics were providing unnecessary procedures to children in order to collect more money from Medicaid.

In January, dental management company Benevis and more than 130 of its affiliated Kool Smiles clinics agreed a $23.9 million settlement for submitting false claims to Medicaid for unnecessary procedures on children. The company gave cash bonuses to dentists who brought in more revenue, according to the U.S. Department of Justice.

"The settlement does not include any admission or determination of wrongdoing," Benevis said in a statement at the time of the settlement. "In fact, the companies strongly disagree with the government’s allegations."

Workman has felt the wrath. He says he’s even received death threats from disgruntled dentists who feel threatened by the deep-pocketed competition. And he says he isn’t welcome at his alma mater. ("All alumni are welcome at the school,” said Bruce Rotter, the dean.)

"I’d love it if people would like me more," Workman said. "But I won’t stop growing our business just to make somebody like me better."

--With assistance from Sally Bakewell.

To contact the reporters on this story: William Mathis in New York at wmathis2@bloomberg.net;Tom Metcalf in New York at tmetcalf7@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Larry Reibstein, Peter Eichenbaum

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