Consolidation

Savings

The fragmentation of the market allows for multiple ways to save money from consolidation. The largest savings are from reduction of goods, which is 27% of revenue on average. The lenses represent 10% of revenue and are the easiest to implement for a small/medium sized consolidator.
Marketing
Phones
Accounting
Lens Lab
Consulting
Billing & Coding
Vendor Discounts (Frames & Contact Lenses)
Computer & IT
Payroll Expenses (Benefits, processing)
HR

Private Equity in Eye Care

According to a lecture delivered by a broker representing optometry practices in over $500 million in PE deals, she estimates that 80% of the 23,000 private optometry practices will be owned by PE by 2030. Americans spend twice as much on care as other wealthy countries,and spending will grow by half in just seven years.According to a 2021 comprehensive report authored by the University of California Berkeley school of public health titled “Soaring private equity investment in the healthcare sector” private equity deals in 2020 soared to 937 deals a 250% increase over 2010. In fact despite a global slow down during the pandemic by private equity of 14%, healthcare deals increased by 21%. According to a research paper published on Optometry and Ophthalmology PE deals, monthly acquisitions by PE in eye care has increased by almost one deal per month every year, with just under 9 deals per month since the beginning of 2021. Since October of 2019, PE has closed deals on 614 clinical locations.

According to an industry trade article on PE in Optometry and Ophthalmology, PE deal multiples average at.

  • Under $3 million: 5 to 7x;
  • $3 to $5 million: 7 to 9x;
  • $5 to $10 million: 9 to 10x;
  • and More than $10 million: greater than 10x
The trend is only beginning in eyecare with the initial groups focused on Ophthalmology, supporting those acquisitions with follow up purchases of optometry practices around their initial purchases. Larger consolidators have had a difficult time scaling due to their focus on savings, retail, and quick exits. KEPLR stands out as the only private equity firm that has created a positive brand image in optometry.
  1. MyEyeDr  
    • Optometry focused, difficulty with branding in the initial roll-out due to heavy focus on retail
    • Sold multiple times over the past 5 years 
    • Most recent sale at 20X multiple of EBITDA to Goldman Sachs 
  2. KEPLR 
    • 211 locations in 32 states 
    • Merger of Total Eye Care Partners (TECP) and Visionary Eye Partners (VEP)  
    • Success from creating a brand focused on the doctors 
  3. Acuity 
    •  46 locations in California  
    • Greater focus on Ophthalmology with some Optometry
  4. Rosin Eyecare  
    • 38 locations in Illinois 
    • Mix Ophthalmology and Optometry  
  5. Total Vision 
    • 36 locations in Southern California  
    • Asking price for group was 12x multiple of EBITDA 
    • Optometry only 
  6. American Vision Partners (AVP) 
    • 120 locations in Nevada, New Mexico, and Arizona  
    • Focus on Ophthalmology with some Optometry 
  7. EyeCare Partners  
    • 18 States 
    • Greater focus on Ophthalmology with some Optometry

What Drives Consolidation ?

Optometry practices offer major growth opportunities, particularly in the high revenue medical and specialty areas. One new patient per month for Surgery and specialty services represents an increase of 10% in EBITDA for the average practice. Medical and specialty has the advantage of being fairly simple to scale as they do not require high staffing or inventory costs to support.
Delegate Ownership Responsibilities
Owner Dr’s face higher administrative and operational costs and burdens driven by increasing government, regulatory, payors and supplier demands
Owner Dr’s face challenges of balancing all responsibilities of practice ownership; doctor, retailer/ merchandiser, billing expert, and HR.
Owner Dr’s face challenges of incorporating the full scope of medical eye care which is most enjoyable and meaningful to them.
Delegate Ownership Responsibilities
Established Dr owners seeking change in practice ownership and engagement • Younger Dr’s, who traditionally step into the ownership role of retiring owners, now graduate with higher levels of student debt, seeking an increased desire for work-life balance
Retail Competition in a Fragmented Industry
Changing competitive dynamics creates the need to become part of larger organizations, in order to successfully compete against large and vertically integrated competitors.
It is becoming increasingly difficult for owner Dr’s to solely compete on a higher standard of care
Risks and increased pressure from online and big box retailers in optical sales reduces profitability of optical focused clinics
Consolidators create efficiencies and economies of scale in a highly fragmented space. This enables platforms to provide a higher value proposition, while remaining competitive against lower cost distribution models, while enabling a higher quality of care.

Management & Regional Approaches with Consolidators

The Traditional Approach
Private equity structures their management by placing regional managers that visit each practice 2-3 times per month. This approach requires a more regional acquisition strategy, to limit the number of regional managers required, which limits scalability and deal flow.
Limited interaction day-to-day with all staff
A major breakdown in communications between senior management and the individual practices
Limited brand identity as one practice never speaks with another
A general feeling of disconnect between corporate and the individual practice and their staff
Limited strategic understanding by senior management of the opportunities available on the ground
Slower identification of risks and threats
Reduction in deal flow as doctors identify less with the brand

Are You Ready to Amplify Your Investment?

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