Published in M&A Award Profiles
Bob Wolford of Grand Rapids Ophthalmology. Bob Wolford of Grand Rapids Ophthalmology. Photo: Katy Batdorff

Deal with Sterling Partners positions Grand Rapids Ophthalmology to grow

BY Sunday, October 15, 2017 08:52pm

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

  • Business description: Full-service provider of eye care

  • Top executive: Bill Hughson, CEO

  • Annual sales: DND

  • Workforce: About 350 full-time employees in West Michigan

  • Best practices for effective dealmaking: According to Executive Director Robert Wolford: “Have great advisers is number one, especially if you’re an organization that hasn’t done a deal until now. The other thing is to be able to see both sides of the transaction and to be able to understand, in our case, that Sterling had its goals to meet and the transaction had to be a good thing for them. They understood conversely the deal had to be a good thing for the doctors and staff at Grand Rapids Ophthalmology. If you can understand it from both sides, it makes it way easier to ultimately come to a resolution.”

    • Advisers: Miller, Johnson, Snell & Cummiskey PLC (legal); Cascade Partners LLC (financial)

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.”

Read 6439 times Last modified on Sunday, 15 October 2017 21:02