One strategist weighs in on the implications for independent practitioners who want to compete in an increasingly corporate market.
John Volk, a senior financial strategist with Brakke Consulting and no stranger to deals being made in the veterinary industry, says Mars' acquisition of VCA has shocked the veterinary industry-but maybe it shouldn't have.
“It's gotten everybody's attention because it was so unexpected,” Volk says. But Mars' previous acquisitions of BluePearl and Pet Partners indicated that it was deviating from the Banfield strategy of opening veterinary clinics inside PetSmart (and some standalone practices as well).
“Clearly when they bought BluePearl and Pet Partners they were going after companies that were acquirers,” Volk says. “VCA is simply an extension of what they've already done, albeit on a much larger scale. At its core, VCA is an acquisition machine.”
Mars is paying a premium for the publicly held VCA stock, at $31 over VCA's closing stock price the day the announcement was made. At first glance this might seem to be in keeping with the current trend of veterinary practice consolidators paying a much higher price for independent practices than those practices would typically draw based on their profitability and value.
Not so fast, Volk says. “Anytime someone buys a public company, whether it's a private company like Mars or another public company, they're going to pay some premium over stock price,” he says. It's standard practice for this kind of acquisition-otherwise the shareholders wouldn't have a reason for not continuing to trade publicly.
So is it possible for independent practices to compete in an increasingly corporate marketplace? By all means, Volk says.
“They have some advantages over corporately owned practices,” Volk says. “When practice owners are local and part of the fabric of community, with an entrepreneurial spirit and a livelihood that depends on their success-there's a lot of energy there.”
Certainly corporate practices have some advantages of their own: They have entire teams focused on things like long-term strategy and budgeting, unlike the independent practitioner who barely has time for today's appointments and charting, let alone setting strategic goals for the business. Corporate practices can also often offer better benefits such as health insurance and 401(k) plans. And they can negotiage with suppliers for deals on products and services because of their size.
“But they also have to feed the machine,” Volk says. “They have to generate profits for outside investors and satisfy them. Independent practice owners answer only to their employees and local pet owners.”
So is this massive ownership merger good or bad for the veterinary profession? Depends on where you sit, Volk says.
“Independent practices may not look forward to competing, but it's a fact of life,” Volk says. “And by the way, it's not happening just in veterinary medicine. This same thing is happening in dentistry, pharmacy and other mom-and-pop professions.”
But for independent practitioners who are approaching retirement and want to sell their highly profitable, well-run veterinary practices? “The fact that there's outside capital chasing practices-that's a good thing,” Volk says.