Case Study: Industry consolidation

Vision Group Holdings

Business background

Vision Group derives revenue from surgical procedures, consulting revenues, theatre fees, facility fees and from sales of optical supplies used in surgery. With the support of AMP Capital, the business was created in November 2001 to lead a consolidation of the ophthalmic surgery sector in Australia. AMP Capital’s initial investment funded Vision Group’s first acquisition, the $28m purchase of the Eye Group, a leading ophthalmic practice in Victoria.

The opportunity

Ophthalmic revenues are largely driven by cataract surgery, an age related condition. Given the aging population, AMP Capital saw significant growth opportunities in this sector. Furthermore, consolidation of facilities and the cost reduction through group purchasing of consumables and capital equipment, made it attractive for doctors to use the operating facilities.

The solution

The doctor partnership model was developed by AMP Capital and Chief Executive Officer of Vision Group, Dr Harry Unger. The doctor partnership model aligned the interests of all shareholders and gave the company greater capacity for continued growth. AMP Capital’s investment strategy was to:

• grow the business by acquisition through the eastern states;
• consolidate the various practices, using a professional management team;
• develop a doctor equity model to attract, retain and incentivise key doctors; and
• achieve an EBITA of circa $15 million by 2005.

Outcome

During the three years 2001–2004, the business grew organically and through acquisitions, expanding from its initial base in Melbourne, into Queensland and New South Wales and exceeded all key financial targets. On 17 December 2004, AMP Capital fully exited its investment in Vision Group through an initial public offer on the Australian Stock Exchange. As a result, AMP Capital realised over three times its invested funds, generating an IRR of 45.2% over the three year holding period.