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ST. LOUIS—EyeCare Partners (ECP), which has reached the milestone of 500 “sites of service” this year, expects an even more ambitious growth trajectory in the second half of 2020 even as the impact of COVID-19 has slowed investment across the overall health care market by some private investor groups.
Yet, ECP—which is the second-largest investor-backed management group in the optical space behind MyEyeDr./Capital Vision Services—managed to remain moderately active in the M&A market during the first half, and last month announced the acquisition of six practice groups in various regional markets.
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ECP also announced in June the addition of David A. Clark to its leadership team in the newly created position of president and, earlier this year, it transitioned to new ownership organization, the Swiss firm Partners Group. Overall, it has been a busy year for ECP, the No. 8 optical retail group in the Vision Monday Top 50 ranking for 2019, with 482 locations and annual volume of $757 million.
Looking back at the beginning of the year, ECP chief executive officer Kelly McCrann said ECP was off to a strong start with results “tracking on or above plan” when the coronavirus situation began. ECP—a network of full scope medical optometry and ophthalmology practices—was “very happy with where we stood,” he said. In response to the coronavirus disruption, ECP moved quickly to close eyecare offices, reduce expenses and suspended capital projects, among other steps, he noted.
As of late July, ECP had reopened all offices (except for a few that it has chosen not to reopen) and was busily working to enhance safety measures and bring staffing levels back up to pre-closing levels across all offices.
The year has brought other major events, as well, with majority ownership changing to Partners Group. The Switzerland-based investor group made a significant investment in ECP as previous owner FFL Partners divested a stake it had held since 2015. The terms of the deal were not disclosed, but reports valued the deal (including debt) at about $2.2 billion. ECP’s management team and physician partners continue to maintain a substantial equity stake.
McCrann said ECP is “delighted” with the new sponsor Partners Group. “We have total alignment philosophically on our commitment to full medical-scope optometry, the highest quality of patient care possible and a deep commitment to our distinctive vertical integration strategy,” he said. “They are completely on board, and while we are all dealing with all of the challenges of COVID, they are still fully committed to the continued development of EyeCare Partners as an organization.”
What this means, he noted, is that ECP continued to execute transactions in the eyecare segment during both the first and second quarters of 2020, with six separate deals covering new optometry, ophthalmology and eye surgery centers finalized in the second quarter. With the added care sites, ECP now operates more than 500 sites of service across 15 states throughout the Midwest, Southeast, Mid-Atlantic and Southwest regions.
“We expect this number [of transactions] to continue to accelerate in the third and fourth quarters as we have a very deep pipeline and there is a high degree of interest from the marketplace, both on the optometry and the ophthalmology side,” McCrann said. “I would even say that I think the COVID experience has led to more practices being interested in the prospect of having a well-capitalized and well-resourced business and capital partner. It helps them manage going forward,” he said, noting that the rate of inquiries to ECP has been increasing.
He added, “We view the business environment as very receptive and we are continuing our business development activities at full speed.”
Mark Barron, ECP’s vice president of mergers and acquisitions, agreed with this assessment. “We all know the world is unpredictable and we’re not predicting what it’s going to look like in the months ahead. But we do believe that this [coronavirus] will pass and we are a well-capitalized enterprise that is continuing to seek partnerships with great practices despite the economic climate.”
In addition, Barron said he expects ECP will build upon its first-half deals with “a more active third quarter” of transaction activity beginning in August. “This will be a mixture of both large and small practices across the board. We have a lot of interest from practices … who are attracted to what they view as a larger capital partner and the benefits that come with that.”
Barron noted that the upcoming transactions include a mix of letters of intent signed pre-COVID as well as deals with practices that have just begun discussing options with ECP in the past couple of months. “We’re active on both fronts,” he said, noting that there are many practices with strong operating results who are still looking to sell “but at good value because they know what they have.”