The Driving Forces Behind Veterinary Consolidation
The veterinary industry is undergoing consolidation at an unprecedented rate with Mars acquiring three major players — VCA, Blue Pearl and Pet Partners — in the past 2 years and other consolidators (NVA, VetCor and others) acquiring practices at an accelerating pace. These changes will have a profound impact on the industry and the changes being brought about by the consolidation needs to be considered and debated.
Human healthcare has seen an even more rapid consolidation, with the small individual doctor practice virtually vanishing in the past 10 years. These changes were driven by third party payors (insurance companies) and the government – with the only way for doctors and hospitals to successfully negotiate reasonable rates was to form large groups with market power.
The veterinary profession is thankfully not driven by insurance reimbursement, but consolidation is accelerating due to demographics and financial consideration. As current owners age and want to exit, the typical path of younger associates buying the practice is more challenging due to heavy educational debt and the value that younger veterinarians place on work-life balance.
Add to these demographic and financial considerations the enhanced interest of financial investors in the veterinary industry — which is driving values of practices even higher and making it harder for younger veterinarians to afford a practice. Financial investors have fallen in love with the industry over the last 5 years because it is recession resistant, relatively stable, and has little government regulation (compared to human healthcare). The number of consolidators has grown from a handful to almost 20 over the past few years, increasing competition for the individual practices.
For a practice owner it is a great time to be a seller – valuations are at an all-time high. For those concerned about the control of the profession it is a challenging time, and it is important for veterinary leaders to understand the need to maintain control and ensure there is opportunity for younger veterinarians to prosper in their profession.
Our advice to practice owners is to pay attention to these trends within the industry, but don’t be overly concerned about what consolidation means for you. Individual, well-run practices have proven that they can be very successful when competing against corporate groups like VCA and Banfield because of their local ownership and knowledge of the community – so while the consolidation can be scary, it can also be an opportunity to be seized.
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