Willam J. Griffin
Covid-19 has undoubtedly impacted veterinary operations. At the height of the crisis, veterinary practices experienced canceled or postponed routine care such as neuters, spays, vaccinations and wellness visits, the implementation of expensive staff, pet, and client safety precautions, and supply shortages and interruptions. However, despite those universal challenges, it has become clear that the notably recession-resistant veterinary sector remains one of the few industries that continues presenting opportunities for profitable mergers and acquisitions.
The disruptive effects of Covid-19 have ignited the accelerated demand for scalable technology solutions in all verticals and present an unexpected silver-lining for veterinary medicine. The effects of Covid-19 have forced veterinary practices to rethink how they operate and do business. Traditionally, slow to change and adopt technology, veterinary practices and consolidators are now looking for scalable solutions to meet their clients’ demands. An additional influential outcome of the pandemic has been a significant increase in pet ownership which has further served to fuel industry growth. Let’s take a look at how these factors have continued to shape the veterinary industry.
Increased Pet Ownership Results in Growing Business
Shelters all across the U.S. could not meet the demands for pet adoptions during the crisis of the pandemic. People’s need for companionship as they struggle with the effects of isolation has reached heightened levels. People working from home were also able to devote the time and attention needed for new pets thus adoptions and fostering were in high demand, and pet owners strengthened their bonds with existing pets.
According to Packaged Facts, today 68 million US households, which is more than half the number of households in the country, have pets. This figure is projected to grow up to 71 million in 2020, fueling the veterinary industry and making it recession-resistant, as was established during the 2008 crisis when the market was only down by 1%, as compared to other industries that were down by 10-50%.
Veterinary Practice Seller Mindset
Many veterinarians are considering selling part, or all, of their practice. Motivated to get out from under the demands of practice ownership, getting closer to retirement age, or simply recognizing the enormous opportunity of selling in the current market we are seeing a surge in practice owners looking to exit.
Even though revenue in some segments of veterinary medicine is not yet back to the pre-Covid-19 levels, the seeds of change are in place. The new processes and technological advancements implemented to meet the demands of veterinary medicine will ultimately improve margins long after the pandemic recovery, and, since routine work by veterinarians is increasing once again, so is business performance.
Positive Impact of Technological Advancements
The adoption of new technological enhancements has laid a framework that has made the veterinary industry even more appealing to consolidators. These technological changes will allow consolidators to finally be able to gain the necessary insights to implement scalable business processes and procedures, consistency, efficient workflows, proper training, metrics, negotiate lower costs, manage inventory, etc. across multiple practices. The potential for scalability and incremental profitability can now be realized with access to key data.
A study “Consolidation: The Art and Science of doing more with less” by Mainstay Partners, found that information consolidation decreases the close time of a sale by 50%, allows 80% more productive reporting and up to 50% improved reconciliation process. U.S. veterinary consolidators are at an inflection point where they can create shareholder value not only through practice acquisitions but by implementing methodologies and technology that increase practice revenue and margin expansion at scale.
In practice, one of Veterinary Integration Solutions’ clients is streamlining all communication from practices to their Home Office through a single point of contact integrated with a knowledge base operated by the VIS team. This dramatically decreases the response time to common questions and routes the complex ones properly within the organization structure. This workflow optimization reduces operational costs, improves business performance and improves employee experience.
Data-Driven Decisions Accelerate Profitability
As we look forward we can see a clear path towards increased profitability through the analysis of key financial and operational data now available through these newly implemented systems and technologies. Financial and operational data integration and analytics can be achieved by migrating to a consolidator operating platform, which is an end-to-end solution for veterinary consolidators designed to cover all stages of M&A, integration and operations resulting in accelerated value creation.
Analyzing this data with the right platform will create greater opportunities for scalability at a lower cost with greater consistency, thereby increasing profitability which opens up new opportunities for interactions between consolidators and veterinary practices and makes now the right time to invest in consolidation.
Opportunities for Veterinary Consolidations are Expansive
The U.S. Veterinary Services Market as measured by revenue, is $42.2bn as of 2020 and there are approximately 28,000 to 32,000 veterinary practices currently operating in the U.S. Corporations own roughly 10% of general animal clinics and approximately 50% of referral practices, which brings total corporate-owned veterinary practices to about 20% of all clinics. Therefore, approximately 80% are still privately held and remain potentially available for consolidation.
The global Veterinary market is also anticipated to rise at a considerable rate between 2020 and 2026. In 2020, the market was growing at a steady rate and with the rising adoption of strategies by key players, the market is expected to rise over the projected horizon.
Four takeaways:
- As we close out 2020 and look ahead, pet ownership and spend-per-pet is on the rise, technology is catching up, and data-driven decisions are now a possibility
- As it is clear that the pandemic will have long-lasting effects on the global economy, veterinary consolidators will need to focus on creating value post-acquisition and search for new efficiencies to improve margins
- Now more than ever before, consolidators can successfully optimize systems and processes that are crucial for the effective scaling and overall business performance that result in increased revenue streams
- Investing in the consolidation of the recession-resistant veterinary industry remains one of the most lucrative investment opportunities today.
