PE sponsors level their gaze at eye care deals

Healthcare sponsors and dealmakers are calling the highly-fragmented ophthalmology universe the “next dental” or the “next derm,” and sources say there’s no shortage of buyers looking through the lens of opportunities.

Indeed, the space that remained untouched for a long time is now commanding a high level of interest from the PE community. The past four weeks alone have produced three private equity deals for medically focused vision groups, while a number of additional assets are said to be on the block.

The latest financial buyer to enter the space is Flexpoint Ford, which last week announced its deal for SouthEast Eye. The move followed a more than year-long sales process that ultimately garnered more than 10 bids from PE, Cross KeysBill Britton, the target’s financial adviser, told Buyouts. Waud Capital, Sterling Partners and Cortec Group are other recent investors in the space.

Beyond what acquirers of such assets view as a massive opportunity to consolidate the space, medically focused eye-care companies have in their favor many of the same tailwinds as the dermatology and dental sectors — both of which remain hot but have already seen their fair share of consolidation.

Demographics for ophthalmology companies are attractive. Not surprisingly, the need for procedures like cataract surgery, glaucoma treatment, Lasik surgery and cornea surgery increases in frequency as the population ages.

Cataracts are common, so it’s the cataract-focused players that are commanding the most interest, sources say. Valuation expectations for such assets are in the double-digit range in terms of EBITDA, whereas the Lasik-driven groups are likely to produce much lower multiples as vision correction via Lasik surgery continues to fall out of favor.

Besides an attractive patient population in what is considered a largely recession-resistant segment, added benefits include favorable reimbursement rates, ancillary upsells, as well as the opportunity to grow geographically.

To be sure, a limited number of assets that PE would consider to be true platform companies are out there. The two of size are FFL PartnersEyeCare Partners and Varsity Healthcare PartnersEyeCare Services Partners, but neither is considered a pure-play provider.

While the majority of pure-play ophthalmology services companies are sub-$10 million or sub-$5 million in EBITDA, that has yet to deter prominent PE groups from placing bets in the sector during its first innings.

Photo of Sarah Pringle, Buyouts.