Veterinary practice mergers: Is there strength in numbers?

TROY, MO. — When it comes to merging their practice with another in the same community, "veterinarians tend to be like farmers — fiercely independent," says Scott Falls, who has spent 17 of his 20 years as a DVM practicing in Troy, a county-seat town of 11,000 about 50 miles west of St. Louis.

That conclusion is supported by one of the findings in DVM Newsmagazine's recent "State of the Veterinary Profession" survey, in which 87 percent of veterinarians reported that few if any practices are consolidating in their community. Only about half (53 percent) consider the trend significant.

But Falls decided that merging with another small-animal practice in Troy works for him, so he's bucking the trend.

He and the other practitioner, Ryan McCann, owner of the Animal Medical Center in Troy, are working with a consultant to determine the appropriate value of clients and good will Falls is bringing to the merger from his 17-year practice on the other side of town, where he was a partner.

Following an unresolved issue with his former partner, Falls says he decided to move, working the last year and a half as a relief DVM for McCann.

"I gave it enough time to see that it was a good situation, so we decided to proceed with the combine. The consultant is helping us determine the right valuation, and the deal should be completed by spring or early summer."

As for competition, Falls says there are five other practices within a five-mile radius, and another eight miles away that is open just one day a week and provides what he calls a "pharmacy-type service." McCann's is the newest practice in the five-mile area, opening in 2000.

Five competitors are not too many, Falls says. "Business has been good for everyone. In 2008 our gross was about the same as the year before, and January (2009) was down only a little from a year ago," he adds. "We did have to reduce staff somewhat, but we try to maintain as close to a full team as possible. We're both big believers in (maintaining) staff."

The practice with a staff of four and just the two veterinarians grosses about $1 million a year, says Falls. Usually only one of the two doctors is on duty at a time, with the other working a day or two at a small satellite office several miles away.

What effect will the current economic downturn have on their practice and other DVMs in the area?

The next two years will be a true test of how recession-resistant the profession really is, Falls believes.

"Until late last year Troy was a growing, thriving St. Louis bedroom community. But now we have at least 60 home foreclosures, with some properties being sold on the courthouse steps. So 2009 and 2010 will be interesting to say the least, not only for us here but throughout most of the country. We'll see where we really stand," Falls says.

Meanwhile, for him, merging the value of his former practice with another is the right move.