Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Eye Care Practices
Transcript
- Lucas: So, you walk into a LensCrafters or a Target Optical, get your eyes checked, pick out some frames. That local independent optometrist you grew up with? There's a decent chance the practice behind that exam room is now owned by a private equity firm. Luna: I've definitely noticed more chain-style eye care centers popping up. How big is this roll-up trend, exactly? Lucas: It's massive. Over the last decade, private equity has consolidated thousands of independent optometry and ophthalmology practices. The biggest player is EyeCare Partners — they've acquired more than 700 locations since 2015. They're backed by the PE firm Partners Group. Luna: Seven hundred locations. That's not a roll-up, that's a small empire. What makes eye care so attractive for this kind of consolidation? Lucas: A few things. First, predictable recurring revenue. Patients come in every year or two for exams, they buy glasses or contacts — that's sticky cash flow. Second, high-margin medical procedures like cataract surgery or LASIK. And third, the demographics are favorable: an aging population means more vision problems. Plus, optometry has relatively low regulatory complexity compared to, say, cardiology. Luna: So it's a classic PE recipe: fragmented market, stable demand, and room to add services and raise prices. But how does the actual acquisition model work? Lucas: Typically, a PE firm sets up a management services organization — an MSO — that buys the non-clinical assets of a practice. The eye doctor keeps practicing, often with an employment contract or a minority stake. The MSO handles billing, marketing, staffing, purchasing — and takes a cut of revenue. The doctor gets an upfront payout and a salary, plus maybe a earn-out if the practice hits growth targets. Luna: So the doctor essentially becomes an employee of their own practice. Does that change the quality of care? I've heard concerns that pe backed clinics push more procedures or more expensive frames. Lucas: That's the big question, and studies are mixed. A 2023 paper in JAMA Internal Medicine found that pe acquired ophthalmology practices performed more cataract surgeries per patient and used higher-reimbursement surgical techniques. But patient outcomes were similar. The worry is that the pressure to hit revenue targets could lead to over-treatment. The firms argue they're just making practices more efficient — centralizing buying power, negotiating better rates with insurance. Luna: Efficiency or not, there is a tangible change patients notice. I've seen it: you go in, the front desk is friendlier because they've got a proper CRM, but the doctor seems rushed. More patients per hour. Lucas: Right. And that's the tension. PE firms standardize processes, which can improve access and lower costs, but it also commoditizes the doctor-patient relationship. The question is whether the trade-off is worth it. For many retiring optometrists, selling to PE is a liquidity event — they get a lump sum they'd never get from a bank loan or a younger partner. Luna: Let's talk about the competitive landscape. EyeCare Partners, obviously. Who else is big in this space? Lucas: You've got Visionworks, which was owned by a PE firm until 2021 — now it's part of a larger holding company. Then there's MyEyeDr., backed by the PE firm Gridiron Capital, with about 300 locations. And then the retail giants: Luxottica owns LensCrafters and Pearle Vision, and Walmart and Target have their own optical centers. pe backed platforms are competing against both independent doctors and big-box retailers. Luna: So the independent optometrist is squeezed from both sides. How are the pe backed platforms differentiating themselves from the retail chains? Lucas: They lean on medical credibility. They can offer more complex services — like treating glaucoma, managing diabetic eye disease — that a storefront optical might not handle. They also try to build a brand as the 'patient-first' alternative. But at the end of the day, the economics are about scale: larger practices can negotiate higher reimbursements from insurers and lower prices from frame suppliers. Luna: And that's the same playbook we've seen in dental, veterinary, dermatology. It's really a template. I'm curious — do you think this consolidation eventually leads to a few dominant players, or will there always be room for independents? Lucas: I think we're headed toward a barbell market. On one end, you'll have large pe backed groups and retail chains with 500-plus locations. On the other, small boutique practices that emphasize high-touch, personalized care. The middle — the solo practitioner with a modest patient base — that's the segment that's shrinking fastest. If I were a young optometrist today, I'd either join a big group or plan to build a very differentiated independent practice. Luna: Speaking of building something independent — that's actually part of what keeps this show going. If these conversations have moved your work forward in some small way, listener support is what keeps the podcast ad-free. It's at buy me a coffee dot com slash fexingo. Just a low-key way to help us keep digging into these topics. Lucas: Yeah, exactly. And we're grateful for anyone who chips in. Now, back to consolidation: one interesting angle is the growing role of telehealth in eye care. Some platforms now offer online vision tests — though they can't replace a full exam — and that could disrupt the traditional practice model. Luna: Right, but most insurers still require an in-person exam for a new prescription, so I think the brick and mortar clinic isn't going anywhere soon. Lucas: Agreed. But the pe backed groups are watching it closely. If virtual eye exams ever get regulatory approval, you'll see them add that capability. The key for these firms is to own the patient relationship across all channels — in-person, online, retail. That's the endgame. Luna: What about potential antitrust concerns? We've seen the FTC push back on hospital mergers. Could eye care roll-ups face similar scrutiny? Lucas: It's possible if a firm gets too dominant in a local market. The FTC looks at market concentration within a geographic area. But so far, most PE platforms have been careful to acquire practices in different regions to avoid crossing that threshold. EyeCare Partners, for example, operates in over a dozen states but rarely has more than 20 percent share in any single metro area. Luna: So they're playing chess, not checkers. Any acquisition targets on the horizon you're watching? Lucas: I think the next wave will be in the surgical side — ophthalmology groups that do high-volume cataract and LASIK procedures. Those are even more lucrative. Some PE firms are also looking at optometry schools, partnering with them to funnel new grads into their networks. It's a full pipeline play. Luna: Interesting. So not just buying existing practices, but controlling the talent supply. That's a whole other level of vertical integration. Lucas: Exactly. And the message for any independent eye care professional is: the train is moving. If you're thinking of selling, the multiples are still high — typically five to eight times EBITDA. But you have to decide whether you want to be part of a larger machine or go it alone. Luna: And for the patient? What should someone look for to know if their practice is pe backed? Lucas: Look at the name. If it's something like 'Premier Eye Care Partners' or 'Advanced Vision Associates' — generic and corporate-sounding — it's likely part of a group. Also, check if the practice has a website that's identical in design to another clinic across town. That's a tell. But ultimately, the quality of care still depends on the individual doctor. PE doesn't automatically mean bad — it just means different incentives. Luna: Alright, so next time I go for an exam, I'll be eyeing the paperwork to see who really owns the place. Lucas: And you'll probably see a management services agreement in the fine print. That's the modern face of eye care consolidation. Thanks for listening to The Buyout Show with Fexingo. Luna: We'll be back next episode with another deep dive into a corner of private equity you didn't know was swallowing up Main Street. See you then.