Is Private Equity Your Practice’s Only Option?

Folks often use the term “scaling up” to describe the deliberate, measured process of growing a scrappy startup into a mature, profitable business. There’s even a recent, very well-regarded business book called Scaling Up, which shares “practical tools and techniques for building an industry-dominating business.”

Beyond the world of business jargon, “scaling up” has another meaning that, frankly, resonates much more strongly for me and, I suspect, anyone who’s built and grown an entrepreneurial business. “Scaling up” also describes the arduous process of surmounting a wall or a steep rock face. It’s a process fraught with uncertainty and risk, and the climber needs expertise, ingenuity, grit, and the right equipment to surmount the obstacle.

As physician entrepreneurs, you know the pain and rewards of scaling up your practices. You aim to build a lasting legacy that serves patients and employs clinicians and staff well beyond your own career, and you must grapple with obstacles as you strive to compete amidst an ever-changing and ever more challenging healthcare market. Sure, you harness your practice’s own ingenuity and resources to surmount the challenges you face and to seize opportunities, but there are times when you feel you could benefit from a boost. At such times you may consider private equity funding and other outside investment options to give you that boost.

Private Equity: The Only Way to Scale?

After lying dormant for the past couple decades or so, private equity is booming again in eye care, and many physician owners are being approached by brokers wanting to do deals. As you explore whether an outside investment option is right for your practice, make sure you take the following three steps:

Update your strategic plan.

Be wary of any broker who offers to update your strategic plan for you because this plan will almost always prioritize the broker’s goals and the PE firm’s goals over your own. An internal strategic planning session is a practical way for you and your partners to distill and clarify your aspirations for your practice, as well as forecast the funds and other resources you need to get there. You and your partners will be in a better position to negotiate if you understand clearly what you want to get out of the deal.

Get to know your prospective partner well before you sign a letter of intent.

Most LOI’s include “no-shop” agreements, which means you can’t solicit other investment partners during the LOI period. You should understand your prospective partner’s strategic interest in your group, as well as its short-term and long-term financial interests. You should know where the PE firm’s money is coming from and whether it has any partners or future owners that could influence your practice’s future. Most private equity firms are looking to exit after three to five years, which means you should be aware of what they plan to do with your practice in order to get a return on their investment.

Understand how the investment will impact all physicians in your practice.

Include any new associates you plan to recruit. Most private equity deals primarily benefit older physicians in the twilight of their practice careers. Traditional PE terms provide them an exit strategy because they allow them to cash out on their investment in the practice. PE is less attractive to younger physicians who aspire to long-term ownership, however, because deals often relegate them to being minority shareholders or even employees. This reality can make it hard for practices to attract and retain new associates in a tight market.

An Alternative Way to Boost Capital

If you decide that a traditional PE deal isn’t right for your practice at this time, don’t abandon your plan to get the boost that outside investment can provide. There are other financial models available that may work better for you, your practice, and your legacy.

As a financial partner, Century Vision Global offers an alternative to private equity. Every deal is different and tailored to the needs and goals of the practices we partner with; nevertheless, here are some key factors that differentiate us from most other investors in the eye care space.

• We don’t do short-term deals. Instead, we are a buy-and-hold investor over the long-term. We typically purchase 51-100 percent of the practice, depending on the personal financial objectives of those who’ve built the practice. We’re not opposed to short-term initiatives that yield profit, but we won’t pursue them at the expense of long-term growth and sustained value.
• We value the leadership of physician owners, new associates, and operational leaders. We understand the value of the team that got your practice to where it is now, and we want to leverage that value for the future. Therefore, we typically make very few changes in the practice immediately after acquisition and we rely heavily on the current clinical and operational team to manage the practice against a shared set of metrics and objectives.
• Over the longer term, we work closely with the practice’s leadership team to shore up weaknesses and pursue new opportunities. We may decide together that your practice needs more advanced software platforms, improved processes, new clinical associates or operational leaders, new locations, new services, or other fresh initiatives to grow optimally. As we identify objectives, we pursue them together as partners.

Next Steps

Interested in learning more about Century Vision Global? Go to http://centuryvisionglobal.com or contact my team and I at buildwithus@cvgloballlc.com or 888-983-9322.