‘Add-on Acquisition’ Deals in 2018 Were Key to PE Growth in Ophthalmology Sector, Report Finds

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BOSTON—Consolidation activity within the ophthalmology sector remained very active through the fourth quarter of 2018, a year in which there were at least 10 transactions publicly disclosed in every quarter, according to a recent report and market analysis by Provident Healthcare Partners. Provident Healthcare Partners, based here, is one of the leading firms in the health care investment banking sector. According to the firm’s analysis of transactions in the ophthalmology sector, 2017 was characterized by the formation of “newly established platforms” backed by private equity financing across the ophthalmology sector.

However, 2018 was “dominated by heavy add-on acquisition activity, as many of the existing private equity-backed organizations continue to grow through acquisitions,” the report noted.

The number of deals classified as add-on acquisitions have outnumbered recapitalization transactions in the ophthalmology sector in the past six quarters, according to the Provident Healthcare report.

Among the significant private equity-led transactions in ophthalmology last year was Cincinnati-based CEI Vision Partners’ acquisition of Dayton Eye Associates of Dayton, Ohio, as VMAIL reported. The Dayton Eye practice included five locations and 17 eyecare providers, according to Provident Healthcare’s ophthalmology market report, which can be downloaded here. CEI Vision, an ophthalmology services organization, was formed by Cincinnati Eye Institute and Revelstoke Capital Partners in May 2018. Cincinnati Eye Institute is one of the largest ophthalmology practices in the country.

According to Provident Healthcare’s report, 2018’s fourth quarter marked the first quarter since the third quarter of 2016 in which there wasn’t a private equity recapitalization transaction, which the firm noted indicates that “new investment in the sector will not be able to sustain its 2017 pace.”

However, Provident Healthcare said it expects total transaction volume in 2019 to remain elevated, “primarily driven by add-on acquisitions as groups look to continue to grow density in their existing markets and in new ones.”

The anticipated number of newly formed platforms in 2019 is not a reflection of a slowing market in ophthalmology, Provident Healthcare vice president Eric Major told VMAIL. “The number of platform deals that closed in 2017 and 2018 was unprecedented in the physician practice management industry, and with [over] 20 different private equity-backed platforms in ophthalmology, add-on acquisition activity is expected to be a key theme in 2019 with a few new investors entering the sector,” he said.