IN APRIL, PRIVATE EQUITY AND venture capital firm Summit Partners invested $128 million in National Veterinary Associates
(NVA), the largest private owner of freestanding veterinary hospitals in the nation, with 99 clinics in 29 states. In May,
the publicly owned VCA Antech Inc. bought Healthy Pet Corp. for $152.9 million, adding Healthy Pet's 44 hospitals to its stable
of more than 450 clinics nationwide. So, what does this mean for you?
The veterinary landscape is changing. Single-doctor practices are becoming a thing of the past. Associates will never be able
to compete with corporate buyers for clinics. Corporations and private investors will control veterinary medicine nationwide.
Not so fast, Chicken Little. Yes, investors are attracted to the veterinary market, and there is some consolidation going
on in corporate practice. Buyers see something in you that's red-hot with opportunity. But things are moving more slowly than
they might seem. Consider that VCA Antech has been in business for more than 20 years and has roughly 450 hospitals in a field
of more than 31,000 practices. That's a lot of room to grow and a lot of room for you to grow your own business model—or sell
your practice later to a corporate buyer.
We asked corporate heads and private investors what they thought about the financial opportunities in veterinary healthcare.
Their answers may give you quite the ego boost. After all, they like you—they really, really like you.
What's not to like?
Veterinary practice is financially attractive for most of the reasons human healthcare is not, says Ryan Daniels, a principal
analyst at the investment firm William Blair & Co. Daniels follows the veterinary healthcare field for investors and evaluates
publicly traded stocks such as IDEXX and VCA Antech. William Blair has helped veterinary companies navigate the initial public
offering process, and its bankers represented NVA in the Summit Partners investment deal.
According to Daniels, investors are hot to get into the veterinary field because you get paid at the time of service, whereas
physicians have to wait for reimbursement from health insurance companies and Medicare. Veterinary malpractice insurance is
also significantly lower. And even if pets' legal status changes in the future, emotional damages rewarded to plaintiffs are
liable to run into the tens of thousands—not the tens of millions.
Daniels also notes that the veterinary healthcare industry has seen steady growth for more than 40 years, including during
five recessions. "That means it's noncyclical, and investors like that," Daniels says.
The bottom line
But don't expect a big corporate takeover in the profession anytime soon. Veterinary practice is still fragmented, and investors
benefit from improved infrastructure only after a lot of consolidation. Daniels figures that an investor would need to buy
one hospital a month for several years before reaching that magic number—about 50 hospitals—when a larger infrastructure starts
to help the bottom line.
More and better
Because economies of scale come with owning many practices, Summit Partners invested in the proven commodity NVA rather than
building its own group from scratch—it wanted several hundred hospitals to start with. Summit Partners' general partner Craig
Frances, MD, now sits on the NVA board. He says the investment company plans to help NVA grow further and improve infrastructure
but will essentially let the hospitals run themselves.