Moss shrinks vet deals, Australian executives say – Reuters

Greencross and VetPartners executives expect practice prices to fall as interest rates rise

Dr. Michelle Kellaway

Photo courtesy of Greencross

Dr Michelle Kellaway, chief operating officer of Australian veterinary company Greencross, practiced for four years before moving into senior roles including at Qantas Airways.

The days of skyrocketing increases in the value of veterinary practices appear to be over, at least in Australia, according to senior executives at the country’s two largest consolidators.

Dr Michelle Kellaway, chief operating officer of Sydney-based Greencross, said practice payouts could even drop as higher interest rates drive up borrowing costs for would-be buyers. .

Any fall would come from a high base. In recent years, consolidators such as Greencross have bid for practices at increasingly higher multiples of their annual revenues amid rising demand for pet care driven by the Covid-19 pandemic. 19.

“However, more recently, we’ve seen several plateaus,” Kellaway told VIN News Service in a wide-ranging interview this week. “With interest rates set to rise, we may start to see multiples soften.”

Greencross, with 167 GP clinics and 25 specialist and emergency sites in Australia and New Zealand, is Australasia’s second largest owner of veterinary hospitals behind US-based National Veterinary Associates (NVA). , which operates in Australia and New Zealand as VetPartners, with over 260 practices.

Mark Jeffery, managing director of VetPartners, agrees with Kellaway that the moss is coming out of veterinary mergers and acquisitions. “And I think it’s not just limited to Australia,” he told VIN News. “That’s true in other markets.”

Central banks around the world have raised interest rates from record lows as an uneven recovery from the pandemic and war in Ukraine push up energy, food and other life costs. life. The Reserve Bank of Australia, for example, raised the country’s official interest rate this week by 50 basis points, higher than expected, in a bid to rein in runaway inflation.

Still, the two leaders said cost-of-living pressures have yet to reduce the demand for pet care at a time when households increasingly view pets as members of the family. .

“There was a surge in demand that started in 2020 when people went out to adopt or buy new puppies and kittens,” Kellaway said. “And that growth rate is still strong: we are now in the third year of pet ownership increasing dramatically, and the industry already had an imbalance in terms of demand and supply of veterinary services. before Covid.”

Jeffery speculated that the tendency for many people to continue working from home, as evidenced by sharp increases in real estate prices outside major cities, gives them more leeway to care for animals. “So I feel like there’s been a structural change in that regard,” he said. “You still see a lot of new puppies there.”

Even so, a decrease in the amount acquirers are willing to pay for assets could signal a more cautious outlook for the veterinary sector.

In the United States, publicly traded animal health companies such as Zoetis, Idexx and Heska recently reported higher first-quarter sales. But their respective stock prices have fallen more than the benchmark S&P/500 since the start of the year, as pet owners fear tightening their belts.

“As we move forward into 2022, there are signs that growth rates may be moderating,” Randy Freides, an analyst with Chicago-based animal health group Brakke Consulting, said in a note dated May 20.

Some market watchers believe the US economy and many others, including Australia, could be heading into recession. “We know the veterinary industry is not recession proof, but it is pretty much recession proof – people are still eating and caring for their pets,” Freides said.

The Australian market is gradually concentrating

A decline in practice valuations related to the slowdown could offer cash-rich consolidators the opportunity to buy clinics at lower prices.

Jeffrey said VetPartners has acquired 30 practices in the past 12 months and has no plans to slow down, saying its offer of a flexible operating model “that supports clinical independence” continues to resonate. strongly in the market.

Kellaway said Greencross, which also owns 262 pet supply stores, plans to expand its veterinary business both through expansion of its own network and through mergers and acquisitions.

Both companies are backed by private equity firms: Greencross is majority owned by US firm TPG Capital. NVA/VetPartners belongs to the German company JAB.


Photo of the VIN information service

Some of Greencross’ veterinary practices can be found in its Petbarn stores, such as the one featured in the Sydney suburb of Alexandria. A rise in the adoption of puppies and kittens has helped boost demand for pet care, even as rising cost-of-living pressures weigh on household budgets.

Last year, TPG put Greencross up for sale but decided in March to sell a 45% stake in the company to Australian and Canadian pension funds, valuing the whole business at around 2.5 billion. of dollars. Greencross then secured a $1.1 billion loan from US investor Apollo Global Management.

Both Greencross and VetPartners executives noted that Australia’s veterinary market is more fragmented than those in the US and UK, where business consolidators control around 50% of all animal practice revenue. company, according to some estimates. In contrast, consolidators have about 20% of the market in Australia, said Jeffery, a former human healthcare executive who once practiced as an optometrist.

Attempting to grow a veterinary business quickly in today’s market has proven difficult for many companies large and small, as the supply of vets has not kept up with the demand fueled by the pandemic.

Kellaway, who practiced as a veterinarian for four years before taking on leadership roles in the business world including the Boston Consulting Group and Qantas Airways’ loyalty business, confirmed the talent market is tough. .

“Salaries for vets are going up, and we make sure to constantly review our salaries to make sure we’re in the market,” she said, adding that Greencross offers benefits to help attract and retain talent, such as career opportunities that may see employees specialize; flexible working hours, including paid parental leave; and investments in new medical equipment and staff wellness initiatives.

VIN News Service Commentaries are opinion pieces featuring ideas, personal experiences and/or views on current issues by members of the veterinary community. To submit a comment for review, email

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