Private Equity’s Tail-Wagging Leap into Veterinary Care
Pet health is big business. In an economic world where healthcare and finance significantly intersect, private equity’s current fascination with veterinary practices is just another example of an industry-wide trend. Upwards of $17 billion spent since 2017—that speaks volumes about the perceived value of this industry. But what does this influx of cash mean for the people at the heart of it all: pet owners?
The PE Playbook: Buy, Boost, Bundle
The playbook is a straightforward one, well-used in the teeth-whitening halls of dental clinics and the test-flask-filled laboratories of diagnostic services. Buy individual or small-group practices for a reasonable multiple. Enhance profits with boosted efficiencies, squeezed costs, and expanded services like luxury pet boarding or specialty surgeries. Package numerous practices into one rollup. Attempt reaping returns in the form of an eventual sale or IPO, at a seductively higher multiple.
What’s Fueling the Interest?
Currently, the veterinary sector is buoyed by some tailwinds that make it attractive to investors. These include our increasing obsession with our pets (sorry, fur babies) and the less cyclical nature of vet spending. Furthermore, the industry is highly fragmented—presenting an inviting ‘roll-up’ opportunity.
Barks, Bites, and Balance Sheets
Private equity firms virtually tell the same tale: they’re improving the business side of vet care, freeing up professionals to focus on our pets. However, things might not be as rosy as they appear.
Secondary market sales often lead to higher debt, meaning clinics need to generate more income. This pressure intensifies the focus on upselling and may results in recommending pricy procedures not strictly necessary.
Moreover, high-pressure environments lead to burnout—a serious concern in an industry with one of the highest suicide rates. Add to this the diminished role of the once owner-vet—now just an employee—and the personal nature and trust that drew people to their local clinics can begin to disappear.
Reflection: More Fur-Trouble Looming?
As major private equity players continue to saturate the veterinary market, we might be seeing more of these issues brought to light. However, as with many PE acquisitions, the detailed impacts—positive or negative—can be hard to assess. Buyouts are often opaque, with clinical outcomes and patient satisfaction seldom shared. With the considerable churn in the market, will we see vet care go the way of dental services—another industry significantly transformed, not necessarily for the better, by private equity’s influence?
The key takeaway is the need for transparency. Pet owners deserve to grasp the full picture when it comes to the financial forces shaping their animal’s care. Money and medicine are undeniably linked, but at what cost? It often falls to us, the bystanders and sometimes victims of these financial undertakings, to keep asking the hard questions. One thing is for sure – in the world of modern PE, even man’s best friend isn’t spared from becoming a profit opportunity.