The veterinary practice sales market has seen significant growth, fueled by increasing demand for pet healthcare services and changing ownership models. Over the last few decades, this market has evolved rapidly due to shifts in pet ownership, advancements in veterinary care, increasing corporatization of veterinary practices, and an aging generation of practice owners looking to sell their businesses.
This article explores how the vet practice sales market has evolved, and what it means for potential buyers and sellers today.
The Growth of Pet Healthcare Services
The growing demand for pet healthcare is one of the main factors that boost the growth of the vet practice sales market. More pet owners who view their pets as family members have increased the demand for veterinary care. For instance, in the United States, the number of pet owners reached a record-high level. The majority of the households reported having at least one pet. These trends are similar in other countries like Australia and Canada.
As the number of pet owners increases, veterinary practice visits also increase, leading to growth and profitability for veterinary practices. As the demand for pet healthcare services rises, the value of veterinary practices increases accordingly. This has directly impacted the veterinary practice sales market since more and more investors see them as financially viable and profitable ventures.
Changes in Ownership Models
Historically, most veterinary practices were small, independently owned businesses, often passed from one generation to the next or sold to local veterinarians. In the last decades, the ownership model changed in such a drastic manner. One of the most significant changes occurred concerning corporate ownership of the veterinary business.
Large corporations and private equity firms have entered the vet practice sales market, buying up individual practices and integrating them into larger, multi-location organizations. This is known as corporatization and has changed the operating model of the veterinary practice from a focus on greater scalability, efficiency, and profitability. To this end, the small practice owner selling their practice now has new options. Corporate buyers frequently pay a premium to individual veterinarians.
Besides corporations, there has been an increase in group practice models, where veterinarians come together to form partnerships or cooperatives. Such models allow the practices to share resources, curtail costs, and provide clients with more varied services. This is largely because the ownership models that have emerged and been embraced have changed the dynamics of the vet practice sales market into something much more competitive and diverse than at any other time before.
Technological Advancements in Veterinary Care
Advances in veterinary medicine and technology have been of importance in the development of the veterinary sales market. Modern veterinary practice has developed to deploy the latest diagnostic equipment, telemedicine platforms, and specialized treatment using laser therapy and surgical practices. Not only do these advances improve veterinary practices’ outcomes but also raise their value since they offer premium services to pet owners.
Of course, buyers in the veterinary practice sales market are very interested in those practices that have invested more in the newer equipment and technologies. Higher profitability and growth potential are often linked to these types of practices, making them more likely to command higher prices and attract more bidders. Sellers who implement these technological advancements into their practice will make it more appealing to their buyers.
The COVID-19 pandemic has also accelerated the expansion of telemedicine in veterinary practice, and virtual consultations have become more common than ever. This creates new revenue streams for veterinary practices and offers more appealing opportunities for tech-savvy investors looking for innovative, future-ready businesses.
The Aging Veterinarian Population
Aging veterinarians, most of whom are reaching retirement and want to sell the practice because they can no longer continue working, form another shape given to the vet practice sales market.
This presents a chance for younger veterinarians to get into ownership positions by purchasing already established businesses, which already have a loyal clientele. However, most potential buyers, often of the younger variety grapple with funding and student loans. Younger veterinarians have a great deal of student debt which makes it difficult for them to raise all of the capital they will need to be able to pay cash for a veterinary practice.
This has also led to creative financing deals, such as seller financing or even joint ventures with corporate buyers wherein younger veterinarians can acquire an interest in a practice over the years. As ever-increasing numbers of veteran veterinarians near retirement, the vet practice sales market will continue to experience increasing competition between buyers whilst the available practices for sale will be on the increase.
The Role of Corporate Consolidation
In short, corporate consolidation in the veterinary industry has dramatically changed the vet practice sales market. Large veterinary chains and corporate groups are gobbling up practices both quickly and often at premium prices. Companies like Mars Veterinary Health, which owns Banfield Pet Hospital and VCA Animal Hospitals, have become new large players owning thousands of veterinary practices around the world.
Corporate consolidation has changed the landscape for independent veterinarians. Some enjoy the stability and reduced paperwork that comes with being acquired by a firm, but others feel that losing autonomy also means losing the personal touch that independent practices offer.
While attractive to many potential sellers, corporate buyers pay a generally higher price and make the process smoother. However, the increased presence of corporate buyers poses a risk of overvaluation, with some predicting that the current pace of acquisitions could lead to unsustainable price inflation.
Role of Private Equity
On the other hand, private equity firms have also become more aggressive in the sale market for veterinary practices, thus fueling the consolidation trend. These firms are viewing veterinary practice as stable cash-generating businesses, with a high growth potential as well. Hence, they will have enough capital to invest to buy several veterinary practices to build sizeable veterinary networks.
This has introduced different dynamics in the market roll-up strategies that involve the acquisition and consolidation of several small practices into a single entity to increase scale efficiency and profitability. Value creation for investors, indeed, but long-term impacts on the veterinary profession as a whole have related to the quality of care and the professional autonomy of veterinarians practicing in those consolidated practices.
Conclusion
Thus, the veterinary practice sales market has seen dramatic shifts in the last two decades with increasing demand for pet healthcare services, changing ownership models, technological advancements, and corporatization of business. All these factors open new markets to buyers and sellers; at this point, larger corporations and private equity firms have come to dominate the market.
The owners of veterinary practices have to be up to date on these emerging trends to maximize the value of their business. Buyers, therefore, should be careful and look at the long-term opportunities that the practices have in holding for them, considering the consolidation trend of the industry.
In the near term, this vet practice sales market seems to be poised and promising with unlimited potential for growth and innovative transitions in practice. Whether a seller or a buyer, appreciation of the dynamics in this changing market is fundamental to sound decision-making.
FAQs
What are some factors that have caused the veterinary practice sales market to grow as much as it has in the past few years?
The growing demand for veterinary services is associated with an increase in pet ownership, where pets are considered part of the family. Hence, the growing desire for veterinary services and corporate consolidation along with technological advancement make veterinary practices more valuable and attractive to buyers.
What share do corporate buyers have in the vet practice sales market?
Corporate buyers and private equity firms have become significant purchasers, buying independent practices to build bigger, more efficient veterinary networks. They often pay more than individual buyers so are very attractive options for owners wanting to sell.
How do technology advances impact veterinary practice sales?
The application of modern technology like telemedicine, diagnostics, and high-end treatment has added more value to the practice since it delivers an elite service. Practices using modern technology are more attractive to buyers looking for new and profitable businesses.