Who is buying veterinary hospitals
Eight months ago, I compiled a list of large veterinary groups, the number of hospitals they controlled, and their financial backing. This blog on who is buying veterinary hospitals has been viewed many times. Some of you have sent me updates and articles with changes over time.
As I mentioned last June, the pace of consolidation in our veterinary industry has dramatically increased in the last several years. Not only has MARS become the biggest player in the veterinary field nationally, but it continues to acquire abroad. MARS has added to its hospitals in the United States, England, and Continental Europe by recently purchasing a group in Brazil. Many believe China will be next.
I opted to re-look at ownership and large groups to see what has changed over the last eight months. I also wanted to clarify several questions and comments I received about the last blog.
Large groups fall into different categories
Large veterinary groups can be loosely grouped into four categories. Some groups have fallen into different categories at different times of their growth.
Organic growth of veterinary led groups. AZ Vet, MAVANA, MedVet, and Ethosvet fall into this category. These are hospitals led by veterinarians that have over time merged with other like-minded veterinarians. Often these groups have strategies that are around quality patient care first. The slower pace of growth has allowed them to build operations and systems.
Private equity backed groups looking for fast growth. Pathway Vet Alliance, VetCor, PetVet Care Centers, and Wellhaven all fall into this category. These are groups trying to grow fast to be able to pay off investors in 3-5 years. Their emphasis is on mergers and acquisition.
Wealthy families looking for diversity in their portfolios. MARS needed a source of revenue that was not sugar based. The Desmarais Family followed suit through the formation of the Lakefield Group. Their interest in veterinary medicine is as an alternate source of return on investment.
Pop up and pet-store-based clinics as a business opportunity. Many people questioned my 2000+ number for the Community Vet Clinics owned by VIP petcare. VIP petcare runs pop up vet clinics within pet stores, so these are not continuously operating locations but they are plentiful. VIP petcare, was acquired by PetIQ, a publicly traded company (NASDAC: PETQ) in January 2018. PetIQ opened its first branded clinic within a Walmart store in March 2018 and now has 20 Walmart locations.
There are an increasing number of businesses providing low cost veterinary care within other businesses. We all know that co-locating with pet supplies was a successful strategy for Banfield with Petsmart. Thrive recently partnered with Petco and is opening small clinics within those stores. The Pet Vet, a locally owned veterinary chain, is also partnering with Petco for in store veterinary care. ShotVet runs pop up vaccine clinics associated with Walgreens. The Pet Stop operates vaccines clinics associated with CVS pharmacies.
What has changed in the last eight months?
There are several trends of note:
1) Consolidation is continuing as seen in the below chart.
2) It is getting harder to track and count what each company owns. Since June, many hospital groups have changed their websites to make counting hospitals more difficult. Several groups have different counts in different parts of their websites. Several groups provide no easy way to discover which hospitals they own. I directly called Heartland Veterinary Partners, and they stated that they never share the number of hospitals they own. Due to signs of distrust of larger groups, new consolidators are aggressively pursuing non-branded strategies.
3) Large groups continue to change hands and look for larger sources of capital. Ethosvet, which has eschewed private equity money in the past, has recently received this type of funds, although in a minority position. Compassion First has flipped to JAB , which owns Krispy Crème and Dr. Pepper, to name just a few of its companies.
4) Sadly, even James Herriot’s former hospital is now owned by a corporate group.
Who is buying veterinary hospitals – The 2019 Charts
Conclusions
Consolidation is progressing and we will continue to see mergers, acquisitions, and new private equity players in the market. Because private equity has a 3-5 year time frame, I believe many of the practices formed 2015 and later will switch hands in the next couple years.
A non-branded strategy has become preferred over the last several years. Consumers do have some distrust of larger entities and often would like to seek out independently owned hospitals. Large veterinary groups hope to capitalize on local brands by not using national names. The newly formed Independent Veterinary Practitioners’ Association may help pet owners differentiate between true local ownership and non-branded large entities.
Despite the consolidation, large groups of this size still represent only 10-15% of the total number of estimated veterinary practices in the United States. Well run independent veterinary hospitals can still be extremely successful. The key is helping the next generation of veterinarians embrace the entrepreneurial spirit that has been a hallmark of our profession and finding new ways to keep our profession firmly in the hands of veterinarians.
14 comments
As founder of Pathway Vet Alliance I can tell you that it is majority owned by veterinarians.
Thanks
Jasen
Thank you for the clarification, Jasen.
Clarifying ownership so this thread of comments is accurate:
https://www.businesswire.com/news/home/20200403005155/en/TSG-Consumer-Partners-Acquires-Pathway-Vet-Alliance-from-Morgan-Stanley-Capital-Partners
Can you expand why ownerships makes your strategy different for others in your grouping. How does your ownership structure benefit the profession?
Hi Franklyn, People and organizations buy veterinary hospitals for different reasons. Most veterinarians buy hospitals because they want control over how they provide care to pets and want to make a good living themselves. Private equity firms buy businesses of all types because their stated goal is to provide a strong return on investment to their investors. I believe type of ownership matters because I believe the WHY for your ownership will drive how you make choices. See: https://vetidealist.com/the-importance-of-why-for-veterinary-hospitals/
Hi Beth, here are few reactions to your recent post. I don’t intend to take on the role of defender of or apologist for the consolidation movement. However, I think the reality is a bit more nuanced than everyone might think, or even want. Simple narratives or black and white scenarios are easier to absorb and internalize but as most of us know by now; the more we learn, the more shades of gray there are, whether in business or medicine. The comments below are mine alone and don’t speak for any of the rest of the industry or for other groups.
We appreciate the distinction of being placed in the “veterinary led groups” and agree with your characterization of this type of group and Ethos both.
Relative to your comment about non-branded strategies, I don’t doubt that is true in some cases. However, I’d be reluctant to ascribe the motive you’ve named as a general condition. There can be a lot of differing reasons about why any given entity pursues a given marketing or brand strategy and even if a national branding or endorser brand strategy is chosen, there may be timing delays in implementing said strategy based on other priorities and available resources (both time and money.)
Ethos generally hasn’t eschewed any given type of money, but instead was and is very intentional about our capital and partnership commitments. Simply, we found a great partner whose interests align nicely with ours and that we feel can help us on our journey to build a great veterinary business.
The message about private equity having a 3-5 year time frame is a bit simplistic, I think. While it’s probably directionally correct, many investment funds are set up with a 10 year duration. During this 10 year duration, various investments can enter or exit a given fund and depending on returns, the time horizon for an investment can run as long as 10 years, and some firms can even reinvest or extend the duration of their investment.
I think it might also be useful to distinguish private equity as an asset class for investment vs private equity firms. Private equity as an asset class for investment is viewed attractively by all manner of investors including individuals, wealthy private families, pension and insurance funds and private equity firms both privately held and publicly traded. Private equity firms are really a subset of the types of investors interested in private equity as an asset class.
Also to your point about practices changing hands, it’s increasingly common that the leadership and management continue to run the company, simply changing out their financial partner over time. The financial partners certainly have specific governance controls so in that sense, the business is changing hands but in another sense, many of the companies will have continuity of leadership and management. In some sense, the controls that the investor(s) aren’t that much different than those in place for any other lender or investor. They can be very different depending on the amount of influence and control exerted at the board and management level but as I like to say, the day your business takes it’s first dollar from a lender (or even a partner), you’ve begun to give up control.
Finally, a quick comment about capital and returns for founders. It’s important to remember that every veterinary practice is founded by a person or a few people. As these businesses attract investment, this rewards the founders and entrepreneurs for their hard work and willingness to take risk. These founders should have the expectation (and right) to search for the best combination of capital and culture that works for them and their families. As they move through this cycle and entertain a transaction of some sort, in almost every instance, the founders’ families and advisors are likely to encourage them to maximize their return given that this will be a singular occurrence for most founders. So to a large extent, the theme of maximizing returns isn’t any different for founders than for other types of investors, even if the time cycle can be a bit different. You’ve been through some of these processes yourself so will almost certainly recognize some of these themes as being familiar.
Hi Brian, Thank you for your comments for reading my blog. My hope is that Ethos may have a dramatically different relationship with private equity than what I witnessed with PetsChoice and BluePearl. I hope that by hearing my experiences, Ethos and others will be more aware of the potential risks and more able to hold on tightly to your WHY.
I agree that founders deserve a return on investment. However, should true maximization of return on investment be the only goal? I think there are a lot of business advisors and accountants who encourage people to only think about the money. Culture and legacy to some people are as or more important. Many veterinarians are either naive at the possible ramifications of a sale (I was) or have only looked at a single buyer. The more understanding veterinarians have about private equity and other funding, the different groups that are out there and potential risks, the better decisions they might make.
Hi there, I know this is an unusual request but is there anyway you could email me the source excel document you used to create your tables at the bottom of the article. It is only for my own personal use and will not be re-shared. If not, thank you for providing this info!
Hi Alex, I do not generally share my raw data. The data in this sheet is also 10 months old and has changed. Feel free to email me at bdavidow@vetidealist.com and I would be happy to chat further.
Hi Elizabeth…do you happen to have current stats on this? I’m currently investigating selling.
Thanks! Roslyn
Is there a way to find out the names of local small veterinary practices/hospitals that MARS owns in my area – Chicago western and northwestern suburbs?
MARS works in the veterinary field under 2 brand names – Banfield, BluePearl and VCA. You should be able to find their practices in your area searching your those names. Many of the other buying groups do not use a branded strategy so much harder to tell with those practices. I think the only truly reliable ways to know who owns the vet hospital you go to is to: 1) Ask directly 2) Search your state’s business license look up tool
It’s all about money and the strive for outperforming the stock market with relatively low-risk investments by financially savvy business people. Consolidation is about a veterinary professional industry run by uneducated, naive, business people who would rather look at a medical chart than a pie chart. The number of pets are growing, fees are set with little competition, the market has turned to young urban professionals and those HH’s making over $150K who are willing to pay for fees that have outperformed the consumer price index (and human medical) since the great recession. Of course the money changers are in the temple. Why? Because that’s where the money is.
This article provides great insights into who is buying veterinary hospitals. It’s interesting to see how the veterinary industry is evolving with new owners bringing different perspectives. Understanding these changes can help us see how veterinary care might improve in the future. Thanks for sharing this information!