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Group of specialty practices plans consolidation
A group of veterinary specialty practices is working on a plan expected to result in a consolidation of about 12 practices next year.
BOULDER, COLO. — A group of veterinary specialty practice representatives is working on a business model expected to result in a consolidation of about 12 specialty practices next year, probably headquartered in the Denver-Boulder area, with plans to expand the group by about four new practices per year thereafter.
About 60 specialty practice owners and executives, representing 38 practices from all parts of the country, met in Boulder recently to work out the details of a consolidation initiative calling for a business model that would allow participating practices to maintain autonomy while building practice capacity and market position.
"We expect the members to come from all areas of the country. The founding members, the initial 12 practices, have not been chosen at this point. Practice valuations and assessments will be undertaken in the first quarter next year and final decisions will be made after that process is complete," says Dwight A. Gaudet, DVM, MA, managing partner of Veterinary Surgical Associates and Veterinary Medical Specialists in Concord, Calif., a spokesman for the group. "We are on track for a third-or fourth-quarter 2009 launch."
The 12 founding members are expected to have gross revenues in excess of $170 million.
"The model allows for distributed governance and decision-making, while providing many of the benefits of traditional consolidation and the resultant economies of scale. We are unaware of anything like this model being used in the veterinary industry," Gaudet says.
While a far larger number of practice owners expressed interest, it was felt that 12 practices was about the right number for the start-up, and four per year thereafter, because "the model we are using would benefit by a slower development, as both the management team becomes familiar with each member practice and the governance board settles into working effectively," Gaudet says.
The organization would have a CEO, COO and CFO, along with a management team of about 10 members. Governance would be through a board of directors representing the member practices, most of which would be multi-specialty.
"We have not formally named the organization yet, but still refer to it as VSPCI, or Veterinary Specialty Practice Consolidation Initiative," Gaudet says.
What was the impetus for the initiative?
"It is a combination of things," Gaudet explains. "The revenue scale of specialty practices we have today has never existed before and that is providing both challenges and opportunities to these practices. The entrance of private equity groups into our industry has been a wake-up call to many, and was the catalyst for getting an education for many others. Also, the first wave of entrepreneurial specialists in our profession is beginning to look for succession plans that allow, not just an exit, but provide a legacy centered upon the veterinary ethos."
Was the current state of the economy a motivating factor?
"It didn't play a significant role other than the early changes in the capital markets modifying the model somewhat to avoid front-end debt and potential sacrifice of any management or leadership control. A challenging economy only seems to make involvement in such a consolidation more attractive," Gaudet says.