The announcement several weeks ago of Goldman Sachs’ purchase of Capital Vision Services (MyEyeDr) marks a significant milestone in private equity’s involvement in the ophthalmic industry. While most of you reading this have been focused on ophthalmology deals and the rich valuations (relative to the traditional buy/sell patterns), there has been activity brewing – albeit more slowly and quietly – on the optometric side that dates back to the first MD practice deals (for example, Katzen Eye, Koch Eye).
The origins of this deal go back to 2001, when Dr. Rob Samit (who had already sold his Hour Eyes optical chain as well as Millennium Laser Eye Centers) started acquiring optometric practices with PE backing under CVS. In 2015, Atlas Partners and a Canadian fund acquired CVS and, just four years later, Goldman Sachs acquires this network of over 500 locations for a whopping $2.7 billion.
Goldman’s purchase proves that this space is attractive to the largest buyers out there. This is smart money, and it is unlikely they would invest in a business unless they saw significant potential for growth (as well as return on investment). While their ultimate motives are not yet understood, the fact that they made an OD play signals that they see optometry as a critical piece of the puzzle and not simply as a referral source. This is one area where ophthalmology is vulnerable, especially if you are highly dependent on OD practices for referrals. A new owner of your trusty referral source can interrupt that pattern overnight.
What does this mean for the private practice owner?
First, you should be paying attention. The consolidation process will continue for many years to come, with larger entities acquiring smaller ones, be they practices, existing platforms or higher-level aggregators.
Second, you should be seeking to understand where you will likely “fit” if you desire to be part of a consolidation and get an independent reality check to make sure that your wishes are likely to be fulfilled in the marketplace.
And third, always seek ways to add to the value of your practice (a main focus of this blog). There are small steps you can take and a continuum all the way up to large investments (including merging or acquiring other smaller practices to be bigger in size).
We are still early in this new era of professional buyers of ophthalmic practices; what Goldman’s entry says above all else is that this isn’t a fad but a trend. Whether all this activity is good for the practice or the patient remains to be seen, and if there’s one thing most professionals fear is loss of control. Stay tuned.