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DALLAS—It’s been a roller-coaster year for the optical sector, and AEG Vision has experienced this as much as most. Its team of managers, doctors and staff who work across 150-plus locations in 12 states have rolled with every dip and curve thrown their way. AEG, which opened 2020 with a new name and branding (the firm was formerly known as Acuity Eyecare Group), got off to a fast start operationally and was primed for an action-filled year in the M&A space.
But then the coronavirus pandemic hit, the group closed all offices across the U.S. As the coronavirus situation moderated in June-July, AEG executed a very successful and gradual reopening across its markets. But just as operations got back on track, a resurgence of coronavirus in some markets (particularly Texas and Arizona where AEG has about 40 locations) has to be addressed. Still, AEG chief executive Eric Anderson and his team are optimistic about the balance of the year and planning for a return to the high points AEG had hit back in January.
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“We were really on a roll in Q1,” Anderson said, noting that top-line growth was strong and the pipeline of prospective acquisitions was full. But by February, Anderson said, he began to take note of what was happening in China and AEG took steps to set up a COVID-19 task force and to start preparations for a coronavirus outbreak in the U.S.
AEG moved quickly and closed its approximately 150 locations by early March. “Up until that point, I would say we were positive versus our plan and everything was really humming along for us,” he said.
At that time, Anderson said AEG—which is a portfolio company of Riata Capital Group—was “pushing” about 20 transactions with independent practices. The firm will continue with its original operating plan for 2020 in terms goals for the existing legacy business.
Joseph Terzo, AEG’s chief development officer, said the shutdown in March-April provided a “reset” opportunity for AEG, and he noted that the group expects to be “highly acquisitive” in the final few months of 2020. “We simply have a substantial pipeline to close through over the next couple of months,” he added, noting that AEG continues to maintain selective posture on deals.
“During the down period, it really allowed us to critically review our existing processes from an acquisition and integration perspective,” Terzo said. “We’re really big on what I will call the seller-partner feedback loop, in terms of what we do well and what we need to improve upon. I am really excited to apply a lot of these new learnings.” Terzo said he is pleased with the way AEG’s practices have rebounded. “It’s a great industry and the [pre-COVID] investment thesis is still pretty much intact,” he sad.
“I expect us to be north of 200 [locations] by the end of the year,” he added. “Our pipeline is stronger than it has ever been. AEG also is better resourced from an acquisition, diligence, integration and M&A execution standpoint than it has ever been.”
Since reopening its practices, AEG has seen its operating results track ahead of year-ago performance, Anderson said. He cited a number of factors for this, including solid planning during the shutdown, new marketing and patient initiatives and the addition of telehealth options. “We also have much more of a rural footprint than a lot of the other optical providers,” he said. “We’re not in malls and we tend to be in smaller communities that were less affected [by coronavirus]. All of this really helped us.”
In reviewing prospective acquisitions, Anderson said AEG is looking at the same performance metrics it considered in the past. Indy practices considering an ownership change have “a more acute awareness” of their options, Anderson said, which may include the safety and structure provided by a larger organization.
There also are funds available for PE-backed groups to use in deal making. “There are fewer places for large funds and private equity to invest post-COVID because so many sectors of the economy are down right now,” Anderson said, which bodes well for the second half of the year and near future, even as the multiples that buyers are paying remain in flux as the coronavirus implications linger.
Anderson added, “What all of us need to do —whether it’s on the buy side or on the organic growth side—is to demonstrate continuity of performance over a period of time. So far for us, May, June and July have been great. So we’re demonstrating to our investors and others that we are doing the right things.”