FLIPPING ANIMAL HOSPITALS FOR BIG PROFITS (BUYING TO SELL):

A common strategy for many veterinary consolidators (most are owned and or controlled by private equity firms) is to buy as many hospitals as quickly as possible and combine them into a larger organization in order to obtain a higher valuation. Within a few years, the combined entity is resold to another industry consolidator for big profits.

Hospital groups can sell for hundreds of millions of dollars (often more than $1 billion) to competing veterinary consolidators.

SHORT-TERM INVESTMENT TIME HORIZON:

  • The typical time horizon for many veterinary consolidators, the period of time one expects to hold an investment (group of hospitals), is usually 3 to 5 years.

The vast majority of animal hospitals that are being sold are increasing being acquired by corporate consolidators. In many cases, big corporations are offering to purchase hospitals for prices in excess of the true value of the practice, at significant multiples of EBITDA. As a result, many independent veterinarians are unable to afford to acquire these hospitals.

SALE PRICE OF HOSPITALS ARE BASED ON EBITDA:
EBITDA, a widely used measure of corporate profitability, which stands for Earnings Before Interest, Taxes, Depreciation and Amortization.

  • In some cases, consolidators have more than doubled their EBITDA, based on its initial purchase.

POTENTIAL SALES OF ANIMAL HOSPITAL GROUPS:
According to axios.com (8.3.22) – EBITDA MORE THAN DOUBLED

  • Partners Group is gearing up for a potential sale of Blue River Petcare. Sources say Blue River is generating around $75 million of EBITDA. That’s up significantly from when Partners Group took over in 2019, when Blue River’s adjusted EBITDA was pegged at north of $30 million according to axios.com.

RELATED:

  • The Vet Clinic Chow Down (6.22.21)
    https://www.npr.org/2021/06/22/1009137378/the-vet-clinic-chow-down

    • Grant Jacobson is a vet in Marshalltown, Iowa. He’d worked at the same clinic for almost two decades and planned one day to buy the place. But a large corporation outbid his price by one million dollars and took over the clinic.
  • Common Perceptions of Corporate-Owned Veterinary Practices
    https://www.pets.care/common-perceptions-about-corporate-owned-veterinary-practices/

    • PRIORITIZE PROFITS OVER PATIENT CARE: Many corporate consolidators prioritize generating returns and often overlook the employee well-being or quality of patient care. Their approach is buying as many hospitals as quickly as possible and then reselling at a higher multiple.
  • CEOs of Corporate Consolidators:
    https://www.pets.care/list-of-chief-executive-officers-of-veterinary-consolidators/

    • Study conducted by CARE for Pets™ reveals that the majority of veterinary consolidators are led by non-veterinarians. Many of the CEOs at veterinary consolidators have extensive experience with corporate finance, mergers and acquisitions (M&A), and high growth companies. Some of the chief executive officers were previously partners at private equity firms.