Private Equity, Ophthalmology and the Rise of the Mega Eye Practice

Only time will tell if private equity can fuel growth in ophthalmology. Are Dick Lindstrom and his partners at Minnesota Eye Consultants (MEC) the tipping point for the spread of the Mega Practice? Is this right for our industry?

Private Equity

Let’s start with a definition of private equity. Investopedia defines private equity this way:

“Private equity is capital that is not noted on a public exchange. Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies, resulting in the delisting of public equity.”

MEC partnered with Waud Capital Partners for their transaction. Dr. Lindstrom lays out the process they went through to make their business decision with Tom Salemi on the OIS Podcast here: OIS Podcast

Tom does an excellent interview, and I encourage you to listen to his show.

Strategic Rationale

Lindstrom lists the strategic factors influencing MEC’s decision as:

1. Access to capital
2. Additional expertise in business practices
3. Mitigate risk for younger partners
4. Preserve a culture of an academic, private practice
5. A liquidity event for senior partners
6. Achieve a higher multiple of earnings for valuation than an internal transaction

What Does this Mean?

My prediction is that MEC and Dr. Lindstrom’s deal will set off a cascade of PE buyouts throughout the industry. They’re not the first group to sell but offer validation to the concept for others.

The physician demographic in ophthalmology is changing. So, does this trend foster an environment to usher in the next generation? What will drive the future deal flow, because that’s the end of the movie money people want to see? Will groups keep getting bigger and bigger, as Dr. Lindstrom suggests?

In each of these new partnerships formed, timing and valuations for the next transaction are critical success factors. Because, that’s what private equity does, they buy and sell businesses. Doctors, they serve patients; while now, many of them are getting new stakeholders in their practices and ASC’s. How will they get along?

Finally, much like visual outcomes in cataract surgery, financial performance will ultimately tell the story. What do you think about all of this? I look forward to comments.