Veterinary services has been one of the most active consumer healthcare subsectors over the past several years. Private equity sponsors have long gravitated toward the strong, resilient demand drivers and the attractive cash pay model of veterinary care. Yet the industry landscape is shifting as major players in the space begin consolidating with one another, say senior bankers from the Harris Williams Healthcare and Life Sciences Group.

“For years, most M&A activity has been driven by roll-up M&A strategies and platforms trading hands between sponsors. The market has wondered when the industry’s largest players would begin to consolidate among themselves,” says Knier. “The combination of People, Pets & Vets and VetCor and VetCor marks the start of the consolidation of the consolidators.”

Knier says that while runway remains for smaller-scale transactions, this shift portends increased emphasis on adding sophistication and professionalization to platforms versus merely seeking scale: “We’ll see more inward focus, with owners optimizing recruiting, retention, staffing, customer engagement, and other value drivers.”

Those improvements will help newly formed, larger platforms pull ahead from the pack in several ways, says Smith, including in today’s inflationary environment. “The most sophisticated platforms within veterinary services, such as People, Pets & Vets, take a data-driven approach to pricing,” he says. "This helps them maintain strong organic growth even in times of downward pressure on volumes.”

Scaled, professionalized platforms also hold an edge in veterinarian recruitment and retention, one of the subsector’s most powerful growth levers. “People, Pets & Vets has the sophistication and resources to build a veterinarian-oriented culture, and the scale to recruit the best DVMs in each market in which it operates,” says Knier. “It’s known for giving DVMs the autonomy to run their practices as they see fit while providing valuable operational support. That makes a major difference in a field where retention and capacity can be a limiting factor.”

While these advantages are driving growth for professionalized, scaled platforms, the entire subsector benefits from a range of powerful tailwinds. “Demand for veterinary care continues to rise,” says Smith. "Consumers continue to spend money on their pets’ health and wellness. We think that’s a long-term trend that will power growth for vet services for years to come.”

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