AAO Virtual 2020 tackles tough private equity questions

My how things have changed for the American Academy of Ophthalmology’s annual meeting. Last year in October we headed to San Francisco to cover the 2019 session. This group has been meeting live every year without fail since 1896. This year, for the first time, ophthalmologists from around the world had to venture no further than their laptop, as AAO 2020 Virtual commenced on November 13.

So, yes, many things about this meeting are not the same, but one thing that hasn’t changed is the sessions devoted to the pros and cons of selling a practice to private equity. We’ve covered these sessions in the past at AAO, and they never disappoint. This year was no exception as private equity took center stage again. Here is a rundown of sessions held during AAO 2020 Virtual:

• Private Equity and the Transformation of Ophthalmic Practice: What Do I Need to Know? This 45-minute session was moderated by Robert E. Wiggins, MD, MHA, the owner of Asheville Eye Associates, which has locations throughout North Carolina. Dr. Wiggins and three other participants helped attendees better understand the reason to consider the sale of their practice, how practices are valued, and the ins and outs of managing the practice of real estate.
• Private Equity Investors: Opportunity of Illusion? Senior instructor Isabelle Bibet-Kalinyak, BBA, MBA, a partner in the national business law firm McDonald Hopkins, specializes in practice transaction and compliance. She underscored the well-known trend that ophthalmology practices are very attractive assets for private equity. Bibet-Kalinyak went on to explain the factors contributing to this trend, how to identify key players, and how to weigh options. She also performed a helpful risk-reward analysis.
• Private Equity Transactions: Answers to the What? Why? How? And Who? Questions: Max Reiboldt, president and CEO of the Coker Group, explained the basic tenets of and private equity model from the practice standpoint, factors that go into valuing an ophthalmology practice, key strategies and tactics before embarking upon a journey with private equity, and how to make deals that more fully benefit both buyer and seller.

We’ve covered many private equity sessions at the AAO annual meeting and other conferences. Here are direct quotes from ophthalmologists who have considered selling to private equity.

Perceived advantages:

• “I’ve been the machine behind this practice for nearly 30 years. I’m tired. Let someone else steer this ship.”
• “Scale is increasingly important. We’d like to grow, but many of our junior partners can’t or won’t invest the money and energy to open new offices and hire new ophthalmologists. Partnering with private equity provides both the capital and expertise to expand our footprint in a strategic and wise manner.”
• “Private equity offers me a multiple that my junior employees aren’t willing to offer.”

Perceived risks:

• “The real value of the group is the quality, stability, and culture of the physicians. [Under private equity], the culture and relationship between the physicians is permanently altered.”
• “I feel very loyal to my employees, some of whom have worked in our practice for more than 30 years. I am afraid that selling our group to a private equity firm would undermine our culture. I am afraid that no one would take care of our people like I have.”