Shore Capital’s sale of EyeSouth Partners shows off lower-mid-market buy-and-build model

The Chicago firm reportedly grew the target's EBITDA from $2m in 2017 to $70m when sold to Olympus Partners in September.

When Shore Capital Partners sold EyeSouth Partners to Olympus Partners, the sale was the culumination of a five-year buy-and-build strategy that grew the regional ophthalmology services manager 20-fold from 13 practioners to 270. The deal, which was announced in September, was valued at just under $1 billion and grew EBITDA from $2 million to more than $70 million, according to sources famiilar with the transaction.

PE Hub interviewed Shore Capital partner Chris Mioton to get an inside look at what levers were pulled to grow and scale the asset, as well as how the dealmaking process evolved during a volatile economic environment.

EyeSouth was formed by Chicago-based Shore Capital back in 2017 with an initial investment in Georgia Eye Partners, a leading ophthalmology practice based in Atlanta with 13 doctors and five locations. This was shortly followed by an investment in Georgia Retina, another practice in Atlanta with a “sterling reputation,” according to Mioton.

“With that foundation, the team built EyeSouth into what it is today – over 270 doctors and 155 locations in 11 states,” he explained. EyeSouth was a “great case study of execution across both organic and inorganic growth levers.”

“Organically, EyeSouth doubled market growth rates through the execution of our management team in recruiting new physicians, developing and utilizing new service lines (such as premium cataract offerings), and building de novo clinic and surgery center locations,” said Mioton. “The EyeSouth team, with the support of Shore Capital, also affiliated with and integrated 33 practices throughout our ownership.”

As with any deal, this transaction required “significant negotiating from both parties at the end,” Mioton explained. “With financing markets in their current state, I could understand why there may be a more significant price gap in certain cases, but that was not an impasse for this process in particular.”

The plans were to sell in 2022 and it was a “fairly standard auction process,” and it went through multiple rounds of bids.

He also noted that given the firm’s investment focus on the lower-mid-market, and starting with relatively conservative leverage at entry, Shore Capital “has been fortunate to elude some of the negative consequences of these conditions on the new investment side.”

“On the sell-side, we expect that premium assets will continue to command a premium, even in a turbulent market,” he said. “We are focused on equipping our companies with the best people and resources to navigate the specific challenges each of them face, and our goal is for each to be viewed as best-in-class in their respective industries.”

When asked how the firm is able to execute on these deals, with plenty of market-related reasons why buyers could say no, Mioton said “our goal is to build companies supported by experienced management teams and with sustainable growth levers to demonstrate a path to a strong return for the next buyer and an enterprise that is built to last. Companies with those characteristics sell themselves, even in a challenged macro environment.”

He added that Shore Capital’s returns “have continued to remain strong.”

“The majority of our value creation comes through replicable growth levers,” he said. “For larger players where debt availability and cash generation drives a more significant portion of their return, I would imagine the impact to returns is more acute.”