Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Pet Care Became Private Equitys Biggest Roll-Up
Transcript
- Lucas: Luna, I want to talk about one of the biggest roll-ups happening in plain sight — veterinary clinics. American pet owners spent roughly $136 billion on their animals last year, and private equity has noticed. Luna: I've definitely seen the signs. Every other strip mall seems to have a 'VCA' or 'Banfield' or some other chain-branded animal hospital. But how deep does the PE involvement actually go? Lucas: Very deep. The biggest player is JAB Consumer Partners — the same firm that owns Peet's Coffee and Panera Bread. They've been acquiring veterinary practices since 2018 through a platform called NVA, or National Veterinary Associates. By late 2025, they owned over 1,500 animal hospitals in the U.S. alone. Luna: That's huge. And they're not the only ones. Lucas: Not at all. There's VetCor, which is backed by private equity and owns around 800 clinics. Mars Inc. — yes, the candy company — runs Banfield Pet Hospital, VCA Animal Hospitals, and BluePearl. They're the largest veterinary provider globally, with over 3,000 clinics. Luna: Mars being in vet care always surprises people. They bought Banfield back in 2007, and they've been consolidating ever since. Lucas: Right. And the thesis is straightforward. Pets are increasingly treated like family members. Per capita spending on veterinary care has grown at a compound annual growth rate of about 6 percent over the past decade. People will pay for cancer treatments, hip replacements, and advanced diagnostics for their dogs and cats. That's sticky, recession-resistant revenue. Luna: So the roll-up logic is the same as with dental or auto body — buy independents, centralize back-office, negotiate better supply contracts, and then sell a larger, more efficient platform to an even bigger buyer. Lucas: Exactly. But vet care has a twist. Unlike dental, where a lot of procedures are elective and price-sensitive, veterinary medicine has a strong emotional component. Owners are less likely to shop around when their pet is sick. That gives clinics pricing power, which is exactly what private equity firms look for. Luna: Let's talk about the economics of a single clinic. What's the typical margin before and after acquisition? Lucas: A well-run independent clinic might operate at a 10 to 15 percent EBITDA margin. After a PE firm buys it and centralizes procurement — drugs, lab supplies, equipment leasing — they can push margins to 20 or 25 percent. The key lever is in-house lab work. Instead of sending blood work to an outside lab that charges $50 per panel, the consolidated platform builds its own lab and does it for $10. That saving drops straight to the bottom line. Luna: And they also standardize pricing. I've seen cases where a pe owned clinic charges $30 more for the same vaccine than the independent down the street. Lucas: That's the trade-off. Consolidation almost always leads to higher prices for consumers over time. A 2023 study from the Federal Trade Commission found that corporate-owned veterinary clinics charged 12 to 18 percent more for common procedures than independent ones. The argument from the firms is that they offer better hours, more technology, and more consistent quality. But the data on quality outcomes is mixed. Luna: And there's another issue. The people actually doing the work — veterinarians — often become employees rather than owners. How are they reacting? Lucas: It's a real tension. Many vets went into the field because they wanted to be their own boss in a small practice. When PE buys them out, they get a payout and a job offer, but they lose autonomy. Some have reported pressure to meet revenue targets, like pushing for more lab tests or follow-up visits. The industry is seeing a rise in 'private practice' movements — vets banding together to form cooperatives to resist being acquired. Luna: That's fascinating. So the roll-up is encountering a labor backlash. And that might cap how far consolidation can go. Lucas: Possibly. But the financial incentives are enormous. JAB sold a minority stake in NVA to a sovereign wealth fund in 2024 at a valuation reportedly over $12 billion. That's a massive multiple on what they originally paid for those clinics. The exit strategy is usually to take the platform public or sell to a larger strategic buyer like a Mars or a insurance company looking to integrate vertically. Luna: Speaking of insurance — pet insurance is growing fast too. Do the roll-up firms own the insurers as well? Lucas: Some do. JAB also owns a pet insurance company called Figo. Mars has its own insurance through the VCA brand. The full vertical integration play is: own the clinic, own the lab, own the insurance, own the pharmacy. That's the endgame. And if you can capture the customer at every touchpoint, the lifetime value of a single pet owner goes up dramatically. Luna: Let's talk about the size of this market. You mentioned $136 billion in total pet spending in 2025. What's the veterinary slice? Lucas: Veterinary care and product sales accounted for about $38 billion of that. So it's a third of the total, and it's the fastest-growing segment — up about 8 percent year-over-year. The number of pet-owning households has stabilized, but the spend per pet keeps climbing. More diagnostics, more specialist referrals, more surgeries. Luna: And all of that is attractive to private equity because it's recurring and inflation-protected. People will cut their own spending before they cut their dog's medical care. Lucas: Exactly. That's the same thesis behind consolidating funeral homes or urgent care centers — emotional necessity trumps price sensitivity. But vet care has one unique risk: the supply of veterinarians is tight. The American Veterinary Medical Association says there are about 120,000 vets in the U.S., and the number of graduates isn't growing fast enough to meet demand. If the roll-up firms can't staff their clinics, they can't grow. Luna: So that's the bottleneck. And it might actually benefit independent vets who can offer a more attractive work environment than a corporate chain. Lucas: Right. Some independent practices are using their flexibility to offer better hours, profit-sharing, or partnership tracks to retain vets. Meanwhile, the corporate giants are trying to solve the labor problem by building their own veterinary schools or offering tuition reimbursement. Mars, for example, has donated hundreds of millions to vet schools. Luna: It's a fascinating dynamic. The consolidation is happening, but it's not a slam dunk. Let's pivot to the deal-making side — what's the typical valuation multiple for a vet practice these days? Lucas: Independent clinics trade at 6 to 8 times EBITDA. Larger platforms with multiple locations can fetch 10 to 12 times. That's rich, but still cheaper than human healthcare, where hospital chains trade at 15 to 20 times. The spread between buy-in and exit multiple is the profit engine for PE. Luna: And the roll-up strategy works best when there are still thousands of independents to acquire. How consolidated is the market today? Lucas: Roughly 25 percent of veterinary clinics are now corporate-owned. That's up from about 15 percent a decade ago. But that means three-quarters are still independent. There's plenty of runway, especially in rural areas where chains haven't penetrated. The challenge is that the best-run independents often don't want to sell. They're profitable, they love their work, and they don't need a liquidity event. Luna: So PE has to pay a premium to convince them. That can squeeze returns if the exit market turns cold. Lucas: Absolutely. And we've seen some cooling in the veterinary IPO market. NVA had plans to go public in 2022 but pulled back due to market volatility. The exit window isn't always open. That's why the biggest players are thinking long term — building platforms they can hold for a decade or more. Luna: Before we wrap, I want to ask about the regulatory landscape. Are there any antitrust concerns with this level of consolidation? Lucas: The FTC has been more active under the current administration. In 2024, they challenged a merger of two large veterinary consolidators in a local market, arguing it would reduce competition and raise prices. But nationally, the market is still fragmented enough that most deals go through. The real scrutiny is at the local level — if one firm owns 70 percent of the clinics in a metro area, that's a problem. Luna: So the next phase might be about defending local market share rather than just acquiring more clinics. Lucas: That's the smart play. Build density in key markets, focus on retention, and invest in brand. The firms that treat their clinics like a network — with shared electronic health records, centralized scheduling, and telemedicine — will outperform those that just slap a logo on a door. Luna: Speaking of telemedicine — that's another growth area. Do you see PE rolling up online vet platforms too? Lucas: Already happening. In 2023, a pe backed platform called Airvet raised $50 million to connect pet owners with vets via video. And JAB has invested in a telemedicine startup called Dutch. The idea is to capture the low-acuity visits — 'my dog has a rash' — that don't need an in-person exam, and then funnel those patients into their own clinics for follow-up. It's a classic cross-sell. Luna: Alright, I think we have a clear picture. The veterinary roll-up is real, it's big, and it's changing how we care for our pets. For listeners who want to see how this plays out, keep an eye on JAB and Mars — they're the ones shaping the industry. Lucas: And if you're a vet or a pet owner, pay attention to who owns your local clinic. The consolidation is only going to accelerate. Thanks, Luna. Luna: Thanks, Lucas. Great conversation.