New corporate player readies for growth, acquisitions.
-— It’s considered one of the largest veterinary practice mergers in U.S. history.
In fact, one transaction brought together 17 general veterinary practices from New Jersey to California with gross revenues topping $70 million. Earlier this year, Companion Animal Practices, North America (CAPNA) was born, without one penny of venture capital. With it comes an aggressive growth plan and the introduction of a business model aimed at preserving the identity of their practices within the communities they serve.
In an exclusive interview with DVM Newsmagazine, CAPNA President Dr. Dennis Law, is bullish about the prospects. The first six months will be focused on framing the internal operational structure, and then CAPNA will start buying. In the next five years the goal is to double in size — totalling about 34 practices and a $150 million gross. CAPNA’s model is built around each practice operating independently but benefiting from a corporate structure to deliver cost efficiencies, other economies of scale, human resources, career development/mobility for veterinarians and staffers and risk management while delivering quality medicine.
“We are in a relationship business,” Law says. “And those relationships we have with our clients are dependent on two to three decades of branding.” The model recognizes the success of each practice, Law adds, and the new structure will help each of the legacy practices improve on the operational, medical, surgical and financial end of the business. “We want to be known as the corporation that is committed to the local practice.”
CAPNA is about 92 percent veterinarian owned. The practices in the merger range in size (from a high of $10 million in gross) and location. Law says they all share a “commitment to high-quality veterinary medicine and surgery,” among other competencies. The merger nets practices in Atlanta, Las Vegas, Rutherford, N.J., New Windsor, N.Y., Kansas City, Irvine, Calif., Tempe, Ariz., and Sugarland, Texas, to name a few.
And while it wasn’t formed to compete with corporate practice giants VCA/Antech or Banfield, CAPNA’s introduction could usher in a new wave of small-scale mergers in an attempt to gain greater operational efficiencies, explains CAPNA’s Chief Financial Officer Owen E. McCafferty, CPA and long-time veterinary accounting and practice management consultant.
In fact, anecdotally, he thinks it is already happening within communities, and it’s been hastened by a stubborn recession.The upside, McCafferty explains, is the competitive advantage achieved by pooling resources, gaining some cost efficiencies associated with delivering medicine, offering alternative employment options for an aging population of practice owners, and a new generation of veterinarians not that interested in business.
“It’s not the classic corporate practice idea here that we are going to go and acquire practices. We are going to assemble as a group. In the past, it has been acquisition of capital and buy up, on a Viking format, as many practices as you can. The objective here is continuation... working together for the future of employees and an opportunity for advancement. At CAPNA there is going to be massive opportunity for advancement of doctors, associates and support staff,” McCafferty explains.
According to board member Pamela Cole, “From the standpoint of evolution, it makes so much sense for those of us who have been in practice a while and who are looking for a way to continue to practice without selling... We have had tremendous interest among the small group of people we have talked to.”
The plans for this merger took root as early as 2005, Law explains. It would take another two years and more meetings to review opportunities and options for the new company. All of the participants had an interest in an equity ownership rather than divestiture of their existing practices. In the early discussions, CAPNA founders developed and explored an idea of home rule, which is “that individual practices could function and self govern to provide maximum flexibility of operation, continuation of success as was exhibited in the past and respect for the underlying culture that has evolved from that practice in the course of years.”
It was this concept, Law explains, that helped solidify the group. “The trust factor was amazing. Veterinarians are very independent people and practices are all unique. We committed ourselves to evolve. That we will all come together and make decisions about best practices, best medicine, best protocol development. It’s hard enough to do it in one practice, but when you make that commitment across 17 practices. I am shocked we came this far this fast,” Law says.
The officers of CAPNA include: Law; Dr. Albert M. Pagani, senior vice president and vice president of development; Dr. Sandra K. Seamans, vice president of operations; Dr. Daniel L. Brod, vice president of strategic partners; Dr. Neal Beeber, treasurer; Dr. J. Thomas Gus, secretary; Dr. R. Steven Taylor, chief medical officer; and McCafferty. CAPNA’s board includes: Law, chairman; Dr. Albert M. Pagani; Gus; Dr. Peter Muller; Dr. Neal Beeber; Cole; and Dr. Dennis M. Arn.