Harris Williams & Co. professionals Geoff Smith, Whit Knier and Taylor Will recently attended the North American Veterinary Community Veterinary Meeting & Expo (VMX) in Orlando, Florida. The event attracted a record-breaking 18,000 attendees, including veterinary professionals, practice owners, private equity investors and vendors.

The Harris Williams & Co. team gained valuable insights on the forces shaping the future of the veterinary services industry, and how investors can make the most of the opportunity.

Rising Prices Drive Shifts in Strategy

The veterinary space continues to attract strong investor attention due to its size, fragmentation and fundamental growth drivers. These dynamics are supporting acquisition price growth, which is driving two key strategy shifts.

First, potential investors are seeking new ways to participate in the segment, including insurance, boarding and grooming, and pharmacy services. Second, buyers are being more selective, taking additional steps to ensure that any hospital they buy fits into the overall service and branding strategy of their platform.

One particular consideration is staffing: Will the veterinarians at acquired practices stay or need to be replaced? Given strong demand for veterinarians and support staff, recruitment, retention, succession planning and training are all becoming increasingly important.

As Geoff Smith, a managing director in the firm’s Healthcare & Life Sciences (HCLS) Group says, “Now that aggregators have built these multi-site platforms, they’re focusing on running them more consistently. That’s where the next phase of growth and value is going to come from.”

Focus on Operations and Systems

Indeed, industry experts attending VMX emphasized that efficient, consistent operations will separate the most successful veterinary platforms from the pack. This is especially true for large, multi-site platforms.

“People will continue aggregating, but to differentiate yourself going forward, operational excellence will be essential. You don’t want to be the last person to figure out how to operate,” says Whit Knier, a director in the HCLS Group.

With some platforms now including hundreds of practices scattered across the country, software that can tie them together is increasingly valuable. This includes practice management systems, pharmacy services software, financial reporting applications, and other solutions that help veterinarians reduce costs, increase revenue and operate more consistently.

Looking even further ahead, branding may become a more important issue. As platforms continue to grow and become regional and national players, there could be advantages to building recognizable brand names. For the present, however, individual veterinarians remain in the spotlight.

“Today, the reputations and relationships of individual vets are most important,” says Taylor Will, an associate in the firm’s HCLS Group. “It will be interesting to see whether new branding strategies shift the focus going forward.”

Conclusion

Strong consumer demand for veterinary services will continue to support robust M&A activity in the sector. With valuations on the rise, investors are looking for alternative ways to participate in the segment, and are being more selective in terms of acquisitions. In addition, growing, multi-site veterinary services platforms stand to move ahead of the pack by focusing on operational excellence and consistency.

For more information, please contact Geoff Smith, Whit Knier or Taylor Will. 

Published March 2018