Davis Vision absorbs Empire in move toward rapid growth

CNY Business Journal (1994-95), Jul 24, 1995 by Hadley, Mark

SYRACUSE--Two companies that established solid footholds in their own niches within the same industry are now focusing on building an even stronger player in the same game.

Empire Vision Centers has merged with Long Island-based Davis Vision, which also included Davis Optical. But it was more than a purely business-driven move, according to Lionel Gilels, president and founder of Empire Vision, who will stay on to run Empire.

Gilels and Davis Optical founder Larry Davis, a long-time friend, were both looking to reap some of the rewards of building successful companies. Both also saw opportunities in the industry that neither was in a position to pursue alone. They needed funding and a national presence because, together, they had landed national contracts to provide vision services and administer vision plans for national corporations.

It was Davis's son, Richard, who brought it all together by teaming with a group of outside investors to put Davis Vision, Inc. into the growth mode. That, according to Gilels, will expand what is already a vertically integrated vision-services provider with nationwide coverage.

"This is a case of true managed care for vision," Gilels explains. Davis Vision is a nationwide, preferred-provider network with 1,600 participating offices now. Gilels predicts that, within three months, there will be more than 2,000 offices in the network.

But what makes it "true managed" in Gilels' eyes is the fact that Davis vision not only controls the provider network, but also controls the manufacture of the eye wear and its quality, the delivery of services, and the administration of vision-benefit programs.

The network means that companies, insurers, health-maintenance organizations, labor groups, and others will be able to provide subscribers to their vision programs with consistent care, product selection and pricing, and service across the country. Richard Davis also plans to incorporate surgical and medical organizations into the business.

Gilels believes that Empire and Davis are offering a service which will be increasingly valuable as federal and state governments and insurance companies look to managed care to control health-care costs. Gilels also expects many major employers and organizations to move toward programs like Davis Vision's.

"Right now, many companies and organizations provide what amounts to an indemnity program for vision care for their employees or members. Each participant in the program gets an eye exam and a specific amount toward the purchase of eye wear each year," Gilels explains. "That allowance is supposed to cover the cost of a pair of contact lenses or glasses each year, but instead the employees find that, if they have $75 or $100, the glasses cost $125. They feel like they have been set up."

Many companies find that no matter how high they set their allowance, the prices for the eye wear are always a step ahead, Gilels says. "How would you like to be spending $10 million or more to provide vision care for your employees, only to have them dissatisfied because they feel they have been set up?"

With Davis's program, Gilels explains, everything is controlled--doctors' fees, the delivery system, and the product itself --quality, selection, and price.

Gilels plans to remain in his position as Empire Vision president and intends to continue expanding the business, which currently covers all of upstate New York except Buffalo. "We want to broaden our presence in our market and expand," Gilels says.

While Empire gets added financial resources, Davis gets not only some additional marketing talent but also the computer and distribution systems that Empire has developed. They will be integrated throughout the Davis Vision system, Davis reports.

The deal was financed by three investors--Golder, Thoma, Cressey, Rauner, Inc. (GTCR), a Chicago-based investment group; Robinson Humphrey, part of the Smith Barney group; and Heller Financial Corp. GTCR holds 49 percent, while the others hold a total of six percent. The Davis family retains the remaining 45 percent of the company.

The investors raised about $57 million in debt and equity. Those funds are being used for the Empire Vision purchase and to provide seed money for other deals.

All involved predict rapid growth in managed vision care and expect Davis Vision to capitalize on that growth.