Independent Vetcare – barking up the right tree
Published December 2016
The vet market continues to attract plenty of interest. Independent Vetcare (IVC), a national group of independent veterinary practices, is currently being sold in what is rumoured to be a hotly contested auction with price expectations at more than 15x EBITDA! It is one of the largest veterinary groups in the UK and was originally formed by August Equity in 2011 through the merger of three practices in the South West. IVC is a buy and build success story, with the number of practices growing to 100 under August and over 290 under Summit Partners’ ownership.
Financial buyers are attracted by the robust, recession-proof nature of the veterinary market. We Brits continue to love our pets and many of us are happy to pay expensive monthly insurance premiums to make sure money is no object if they ever require medical treatment, not to mention fancy food and health supplements. As such, market growth and levels of profitability have been significant. The combination of a fragmented market and traditional disposal route for business owners – selling practices to younger vets being no longer as viable as it once was – means there is a vast pool of potential surgeries for both trade and financial buyers to acquire. Around this sector, niche markets such as pet insurance, pet nutraceuticals and dietary supplements have attractive growth fundamentals.
The vet services market now looks set to follow in the footsteps of optical retail, which relaxed ownership rules in 1984, some 15 years earlier than vets. Independent optician practices now make up less than 30% of the market, compared to 65% 30 years ago, with the remainder dominated by the big four (Specsavers, Boots, Vision Express and Optical Express). Consolidation was driven by powerful TV advertising campaigns and significant bulk purchasing discounts.
Whilst the evolution of buying groups has enabled independent vet practices to benefit from economies of scale, the vast size, brand and marketing power of the corporate vet groups means it will never be a level playing field.