Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Veterinary Practices
Transcript
- Lucas: If you've taken your dog or cat to the vet in the past few years, there's a decent chance you were sitting in a waiting room owned by a private equity firm or a large corporate group. And not a small chance — we're talking roughly one in four vet clinics in the US now have some form of institutional ownership. Luna: That number surprised me when I first saw it. I think most pet owners still think of their local vet as an independent small business. Lucas: Right, and that's exactly the perception the consolidators rely on. They don't change the name on the sign. They don't fire the beloved vet. What they do is buy the real estate, take over the back office, and centralize purchasing, payroll, and specialty referrals. Luna: So the sign still says 'Dr. Miller's Animal Hospital,' but Dr. Miller is now an employee of a regional network owned by, say, PetVet or Mars? Lucas: Exactly. Mars Inc. — yes, the candy company — is actually the second-largest owner of veterinary practices in the world after its acquisition of Banfield Pet Hospital years ago. They now run thousands of clinics globally through their Mars Petcare division. And then you have pure-play private equity firms like PetVet, which has raised hundreds of millions to roll up independent clinics. Luna: Let's talk about the economics. Why is veterinary medicine such an attractive target? I imagine the margins aren't as juicy as, say, dental or dermatology. Lucas: You'd be surprised. The average veterinary practice runs on margins around 15 to 20 percent before consolidation — not spectacular, but stable. The real play is that pet spending has been growing at about 6 to 7 percent annually, and it's largely recession-resistant. People will cut their own grocery budget before they skip a vet visit for a sick pet. Luna: There's an emotional lock-in. You're not price-shopping when your dog has a limp. Lucas: Exactly. And the consolidators bring scale. A single clinic pays maybe 30 percent more for flea and tick medication than a chain buying for two hundred locations. They can negotiate better rates with specialty labs, and they can offer higher salaries to attract vets in a tight labor market. Luna: Which is a real problem — there's a shortage of veterinarians. The American Veterinary Medical Association says we're short something like fifteen thousand vets. Lucas: And that shortage is a tailwind for consolidation. Independent clinics struggle to recruit, especially in rural areas. A corporate owner can offer a signing bonus, a clear career ladder, and the ability to move between locations. So the pitch to selling vets is: 'You'll get a check, you'll keep your name on the door, and your staff will get better benefits.' Luna: But what about the pet owner? Does consolidation mean higher prices? Lucas: There's early evidence that it does. A 2024 study looked at pricing across independent vs. corporate-owned clinics and found that corporate clinics charged about 10 to 15 percent more for routine procedures like vaccinations and dental cleanings. The justification is that they're offering more advanced equipment, longer hours, and integrated digital records. Luna: But if you're a pet owner on a budget, you might just see a higher bill and wonder why. Lucas: Right. And that's created a kind of two-tier market. You have the high-end corporate clinics with MRI machines and oncology suites, and then you have the remaining independent vets who can't compete on amenities but may offer more affordable basic care. The worry is that the independents get squeezed out over time. Luna: That's exactly what happened in the UK. They consolidated veterinary practices much earlier, and now about two-thirds of clinics are corporate-owned. Prices have gone up noticeably, and there's been pushback from consumer groups. Lucas: The UK is a good case study. In 2023, the UK competition authority opened an investigation into the veterinary market, specifically looking at whether the big groups — CVS Group, IVC Evidensia — were overcharging for prescriptions and follow-up visits. They found that pet owners often paid more than double for the same medication at a corporate clinic versus an online pharmacy. Luna: So we could see similar scrutiny in the US if the trend continues. The FTC has already been looking at healthcare roll-ups more broadly. Lucas: And there's a specific practice that's drawing attention: some corporate-owned clinics require pet owners to buy prescriptions through their in-house pharmacy as a condition of the visit. That's a classic vertical integration move — capture the recurring revenue. Luna: It's the same playbook we've seen in human healthcare with hospital systems buying up physician practices and then steering patients to their own labs and pharmacies. Lucas: Exactly. And the parallels don't stop there. We've also seen the rise of urgent care for pets — places like Vetco or UrgentVet — which are essentially the veterinary version of the minute clinic. Private equity loves that model because it's lower overhead and higher throughput. Luna: We should also mention that not all consolidation is bad for quality. Some networks are investing in telemedicine and 24/7 emergency coverage that a solo practice simply couldn't afford. Lucas: That's a fair point. A multi-location group can staff a single after-hours call center that routes emergencies to the nearest open clinic. That's a real benefit. The question is whether the cost savings from scale are passed on to pet owners or captured as profit. Luna: And whether the veterinarian's clinical judgment is overridden by corporate protocols. I've spoken to vets who say they feel pressure to recommend more tests or procedures to hit revenue targets. Lucas: That's the risk in any vertical where the owner doesn't practice the medicine. You start measuring productivity in 'transactions per hour' instead of patient outcomes. Some firms are better than others about insulating clinical decisions. Luna: You know, this kind of deep dive into an industry's nuts and bolts is exactly why we keep this show ad-free. We want to be able to follow the money wherever it goes without worrying about pleasing sponsors. Lucas: Absolutely. It matters to us that listeners get the full picture — the upsides and the trade-offs — without any agenda. If you find that valuable and want to help us keep it that way, you can support the show at buy me a coffee dot com slash fexingo. Luna: Every bit of support goes directly into research and production. It's how we stay independent. Lucas: Back to the vet story. One of the more interesting developments is that some private equity firms are now buying up veterinary specialty and emergency hospitals — the kind that do surgeries and overnight care. Those are much more expensive acquisitions, but the margins are higher and the barriers to entry are steep. Luna: So the consolidation is moving up the complexity chain. It's not just general practice anymore. Lucas: Right. And that has implications for pet insurance — which is another rapidly growing market, by the way. As the cost of specialty care rises, more owners buy insurance, and insurers then negotiate directly with the big corporate groups, creating a closed loop. Luna: It sounds like the veterinary industry is about ten years behind human healthcare on the consolidation curve. We have a chance to see what's coming and decide if we like it. Lucas: That's the optimist's view. The pessimist's view is that we're already too late — the roll-up has been underway for a decade, and the independent vet is becoming an endangered species. But there are still holdouts, and some states are considering legislation to limit corporate ownership of veterinary practices. Luna: Really? Which states? Lucas: California and New York have had proposals that would require a licensed veterinarian to own a majority stake in any practice. They haven't passed yet, but they signal a growing unease. The veterinary lobby is split — younger vets often welcome the corporate salary, while older owners want to protect their ability to sell. Luna: It's a classic tension between the profession's identity and its economic reality. Lucas: Exactly. And that tension isn't going away. For now, the consolidation train keeps rolling. The only question is whether the destination is more like the UK, where prices are higher but access to advanced care is broad, or more like the dental industry in the US, where private equity has led to a patchwork of good and bad outcomes. Luna: That's the question we'll all be watching. For pet owners, the best advice might be to ask your vet directly: 'Who owns this practice?' It's a simple question, and the answer tells you a lot. Lucas: Good recommendation. And maybe start price-shopping for prescriptions — just like you would for your own. Thanks for listening.