Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / How Private Equity Is Buying Up Veterinary Clinics
Transcript
- Lucas: Private equity firms now own roughly one in five veterinary practices in the United States. A decade ago, that number was effectively zero. Luna: Wait — one in five? That's huge. I knew consolidation was happening, but I didn't realize it was already that far along. Lucas: Yeah, it's been one of the fastest roll-ups in healthcare services. The model is pretty standard: a PE firm forms a platform — names like Compassion-First, Thrive Pet Healthcare, VetCor — and starts buying up independent clinics, usually at seven to fourteen times EBITDA. Luna: And those multiples have gone up, right? I remember reading that a few years ago they were closer to six or seven times. Lucas: Exactly. Five years ago, a well-run single clinic might trade for six times EBITDA. Now the same clinic — because there are so many buyers — can get twelve or even fourteen times. That's a huge jump. And it's driven by the thesis that pet spending is recession-resistant and growing. Luna: Americans spent about $35 billion on vet care last year, up from maybe $15 billion in 2010. So the tailwind is real. Lucas: Right. And PE firms are betting they can professionalize the back office — centralize purchasing, negotiate better prices on drugs and supplies, and then layer on management fees. The clinics keep their local brand and the same vets, but the financials get consolidated. Luna: But here's the thing I wonder about: does that actually lead to better care? Or does it just mean higher prices for pet owners? Lucas: Great question. There's evidence both ways. On one hand, larger groups can invest in better equipment — digital X-ray, in-house labs, specialists. That can improve outcomes. On the other hand, several studies have shown that prices at pe owned clinics are consistently higher — sometimes twenty to thirty percent more for routine procedures. Luna: Right, and if you're a pet owner who's already struggling, that's a real access issue. Especially if your local vet gets bought out and suddenly the prices jump. Lucas: Yeah, it raises questions about access. And it's not just prices — there's also pressure on the vets themselves. Producing more cases per day, hitting revenue targets. Some vets have told me they feel like they're on a hamster wheel, which contributes to burnout in a profession already facing shortages. Luna: That's a real cost. You lose experienced vets, and then care quality can slip. But I've also heard that some PE groups offer better compensation and signing bonuses to attract talent. Lucas: They do. Base salaries have gone up. But the trade-off is often less autonomy. The vet might not get to decide which drugs to stock or which specialists to refer to. Those decisions get made centrally. Luna: It sounds like the same playbook we've seen in urgent care and physical therapy. The question is whether vet care is different because people love their pets more than… say, their own knee recovery. Lucas: Possibly. Pet owners are emotionally locked in. But there's also a financial ceiling: pet insurance penetration is still low — about four percent of pets are insured in the US. Without insurance, big vet bills can be a shock. And if prices keep rising, you might get a two-tier system: premium care for those who can afford it, and basic care for everyone else. Luna: So where does this go? Is the consolidation still accelerating? Lucas: It is, but it's getting more expensive to buy clinics. The multiples are high, and there's a finite pool of independent clinics — maybe twenty thousand in the US. Some analysts think we're past the easy pickings. But the big platforms are still raising capital. Last year, Compassion-First bought a group of forty practices in one deal. Luna: Forty at once? That's a big bet. And I'm guessing they're not done. Lucas: No, they're not. The consolidation wave probably has another five to seven years of steam. But then you have to ask: what happens when the platforms themselves want to exit? Will we see an IPO, or do they get sold to larger players, like insurance companies or even pharma? Luna: That's the endgame question for a lot of roll-ups. It's also a reminder that the business of veterinary medicine is fundamentally changing. Lucas: And if this conversation has made you think about how these forces reshape the industries we rely on — maybe it's given you some insight into your own profession or investments — that's exactly the kind of thing we try to do on this show. A couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, listener support is what keeps us ad-free and focused on the details. It really makes a difference. Lucas: Alright — back to the vet space. One more angle I want to touch on: the role of corporate practice of medicine laws. In some states, only licensed veterinarians can own a practice, so PE firms structure the deals with a management services organization model, or MSO. Luna: Right — the MSO owns the assets, the real estate, the equipment, and then contracts with the vet-owned professional entity for clinical services. That's how they get around the restrictions. Lucas: Exactly. And that structure isn't unique to vet — it's used in dental, optometry, dermatology. But it does create a separation between clinical decision-making and financial management. Some critics say that puts profit motives ahead of patient care. Luna: But the PE firms would argue that without that separation, they couldn't invest in the technology and scale that actually improve care. It's a legitimate tension. Lucas: It is. And it's not going away. What's interesting is that a few states are now considering legislation to tighten these laws, partly in response to concerns about private equity in healthcare. Luna: So regulatory risk is another factor. That could slow down the roll-up if states start cracking down. Lucas: Could. But right now, the momentum is still with the buyers. We'll have to watch how it plays out over the next few years. Luna: I'm curious: if you were a vet practice owner today, would you sell to a PE roll-up? Lucas: That's a personal decision. If you're close to retirement and want a liquidity event, the multiples are very attractive. If you're younger and want to keep practicing your way, you might hold out or sell to a smaller group. The numbers are hard to ignore, though. Luna: And that's exactly why consolidation is happening. The price is right. But the long-term effects on care and access are still unfolding. Lucas: Right. We'll keep tracking it. For now, it's a good case study in how private equity adapts a playbook to a new sector. Luna: Agreed. And how the emotional bond people have with their pets creates a unique dynamic — one that PE is definitely paying attention to.