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Following the merger, almost all of the new company’s clinics will be branded as Dermapure, with a handful operating as ProjectSkin MD.Handout

Two of Canada’s largest groups of medical-aesthetics clinics are merging as the industry becomes a major target for consolidation.

FYihealth Group, a Calgary-based health care company, is spinning off its medical-aesthetics division and merging it with Montreal-based Functionalab Group to form a new entity, which will operate most of its clinics under the Dermapure banner.

The two companies operate chains of clinics that do non-invasive cosmetic procedures, such as laser hair removal, tattoo removal and lip augmentation.

The combined business, which will retain the Functionalab name, will have 68 locations to start and is projected to grow to more than 80 by the end of next year, or more than 15 per cent of all medical-aesthetics clinics in Canada.

Once the merger closes in January, the new entity is expected to take in more than $200-million in annual revenue.

Francis Maheu, who is chief executive officer of Functionalab and who is set to be co-CEO of the new venture, said the goal is to create a single, strong national brand that builds on the two companies’ strengths in Eastern and Western Canada.

“Our view is that this market is increasingly favouring branded, retail concepts,” Mr. Maheu said.

FYihealth grew out of FYi Eye Care Services and Products Inc., a consolidator of optometry clinics that was founded in 2008. Unlike most health consolidators, FYi is owned and operated by medical professionals. Doctors will continue to own shares in the new firm. New York private-equity firm L Catterton made a nine-figure minority investment in FYi in 2020 and will also have a stake in the new entity.

Functionalab was founded in 2009 and, in addition to operating 31 clinics, it has developed its own line of skincare products. In 2019, international cosmetics giant L’Oreal invested in Functionalab through a venture-capital fund and will retain minority ownership of the new business.

Almost all of the new company’s clinics will be branded as Dermapure, with a handful operating as ProjectSkin MD.

Marilyne Gagné, president of Dermapure, said she is hoping to expand the business internationally. “L’Oreal loves ProjectSkin, it’s been their big flagship in Canada,” she said.

Jason McWhirter, head of FYihealth’s medical-aesthetics division and who will be the other co-CEO of the new business, said the industry has been under increasing consolidation pressure in the past three years as outside investors look for opportunities in the sector in Canada. He said this merger, which will combine the two biggest current consolidators, will allow them to compete more effectively.

“It’s going to be a great advantage to be a leader in the Canadian market,” Mr. McWhirter said.