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Dentist Tim Milligan and assistant Tracy McCaughan treat patient Doc Maclean at Mlliagan's offices in Toronto on Jan. 9, 2009KEVIN VAN PAASSEN/The Globe and Mail

Private equity activity is heating up in the Canadian health care space in the form of a $121-million investment in Dental Corp. of Canada Holdings Inc.

Mid-market private equity group Imperial Capital joined with the private markets group of pension fund OPTrust to make the investment Monday, after identifying that dental service businesses have been growing quickly in other developed markets.

Toronto-based Dental Corp. provides back-office services in administration, HR and training, among other services that allow dentists to focus more on their practices and less on paperwork.

Dental practice management companies have become popular in the U.S., but the Canadian market remains fragmented, said Jeffrey Rosenthal, managing partner at Imperial Capital.

Dental Corp. has the largest group of dental practices in Canada with about 90 clinics, and has an attractive focus on higher-end practices, such as orthodontics. The company targets the top 25 per cent of practices in Canada and attracts new business by supporting the autonomy of dental professionals, allowing them to run their clinics the way they want to.

Private equity firms have been active in Canada this year. In the first quarter of 2014 private equity deals doubled in value compared to the same period last year, up to $4.6-billion from $2.3-billion, according to Canada's Venture Capital & Private Equity Association. Much of the volume was due to bigger deals, and two of the largest were in health and life sciences.

Dental Corp. has its roots in an Australian company of the same name, which became a sponsor of the business. More recently Dental Corp. has been controlled by UK-based health care group Bupa Global. Since Canada was a non-core market for Bupa, Imperial Capital and OPTrust are stepping in to be the local partners for Dental Corp., buying out Bupa's stake.

Imperial has an investment focus on businesses with steady cash flow that offer necessity products and services, as well as an interest in health care, all of which made Dental Corp. a good fit.

"In health care there's different levels of political risk and pay risk depending on which sub-sector you're looking at, and which side of the border you're on," Mr. Rosenthal said. The dental sector offer low pay and political risks, he said.

Imperial does an equal number of financing in Canada and the U.S. and has a time horizon of three to seven years.