MiBiz 2017 M+A Deals & Dealmakers Awards Finalist: Deal $25 million than $150 million
The 2014 sale of a Baltimore, Md.-based optical practice to a Los Angeles private equity firm was one of two industry deals that led to an opportunity for the partners at Grand Rapids Ophthalmology PC.
An investment banker involved in one of the transactions later approached Grand Rapids Ophthalmology to ask if it wanted to learn more about the deal. In order to keep growing and explore its options, the practice agreed to the meeting.
“Grand Rapids Ophthalmology has never been an organization that sticks its head in the sand, so we said, ‘Of course we’d like to know more.’ We brought them in to talk to our board and there was a level of interest,” said Bob Wolford, executive director of the eye care practice.
That interest started a process that culminated with the sale early this year of a majority stake in Grand Rapids Ophthalmology to Chicago private equity firm Sterling Partners. With the deal, the private equity firm formed a medical services organization, Great Lakes MSO, that looks to acquire complementary practices in the state and across the Midwest.
Grand Rapids Ophthalmology
The deal earned recognition as a finalist in the 2017 MiBiz M&A Deal of the Year Awards in the category for transactions between $25 million and $150 million.
Since the transaction closed Feb. 2, Grand Rapids Ophthalmology has acquired an eye care practice in East Grand Rapids, hired additional top-level executive talent — including CEO Bill Hughson — and is actively seeking deals.
“Part of our doctors’ interest was we’ve always been an organization that was progressive and growth oriented, and yet our ability to continue to grow would have been somewhat limited” because of the capital required for acquisitions, Wolford said. “A transaction like this sort of facilitated continued growth, and in health care growth is really important.”
In the West Michigan marketplace that’s home to three large health systems — Spectrum Health; Mercy Health, owned by Trinity Health; and Metro Health-University of Michigan Health System — any health care company has “to have a level of significance,” Wolford said.
Formed in 1982, Grand Rapids Ophthalmology has 10 offices in West Michigan, including two surgery centers, with more than 30 physicians. The practice includes optometry, retail optical, oculoplastics, cataract, glaucoma and Lasik eye surgery, and retinal subspecialties.
The deal with Sterling Partners comes amid a consolidation trend in health care that’s pushing into specialties such as ophthalmology, dermatology and emergency medicine practices, said Raj Kothari, managing director of Southfield-based investment banking firm Cascade Partners LLC, which advised Grand Rapids Ophthalmology in the deal.
“The field of medicine is getting too complicated for smaller physician practices to compete on their own,” Kothari wrote in nominating Grand Rapids Ophthalmology for the award. “Doctors want to be doctors.”
Physicians who were partners in Grand Rapids Ophthalmology retained a minority stake in the practice.
Through the transaction, Grand Rapids Ophthalmology got access to capital to finance growth and achieve a larger scale needed to better operate and compete in today’s health care world.
“For doctors, the increased size and scale helps them focus on practicing medicine, reducing the difficulties associated with billing and collections, human resources, negotiating with payers, securing the best possible pricing from vendors, and giving them a stronger seat at the table as more and more of health care becomes consolidated,” Dan Hosler, senior vice president of strategy and business development at Grand Rapids Ophthalmology, said in a statement.
Hosler was previously a principal at Sterling Partners, which has more than $4 billion in assets under management and invests in middle-market companies involved in the health care industry and business services.
The deal has enabled Grand Rapids Ophthalmology to actively pursue acquisitions or partnerships “to make something that’s really strong and has the ability to bring technology and specialized eye care to a really broader area,” Wolford said. The company is presently “working hard” on a couple of potential deals, he added.
Patients benefit from any deals through the eye care practice’s ability to invest in the latest medical technology that’s a “little pricey,” Wolford said. He cites the recent purchase of new laser equipment for Lasik surgery.
“Some of those practices that are around the state of Michigan, maybe even outside of Michigan in neighboring states like Ohio and Indiana, now we can talk to them,” Wolford said. “Maybe there is some value about doing things together that we otherwise couldn’t do, and maybe consolidating into one practice can have even more impact on the delivery of eye care throughout the region.”