Each year one of the largest corporate veterinary practice owners holds a one-day conference exclusively for veterinary practice brokers. At the conference, they discuss, amongst many other things, how their company is different than other corporates, how they value veterinary practices, and trends in corporate buying. It’s an interesting meeting to get the “state of the union” from a corporate buyers’ perspective. I wanted to share with you some of the notes I took and give you my thoughts on a few of their points.
- Corporates are continuing to expand. Not only in the U.S. and Canada, but this corporate buyer has begun acquiring practices in Australia and New Zealand.
- Some corporates have begun to do de novo practices. They are filling the gaps where they don’t have ownership of a practice with a startup practice. If you can’t buy it, build it!
- The DVM retention rate for the industry is 62%. A particular corporate claimed to retain DVMs at a rate of 82.5%. They said it’s due to how they treat the DVM and staff leaving everything as close to the same as possible. They also give the owners a piece of the pie.
- There currently is a shortage of DVM associates. They are putting a heavy effort towards recruiting DVMs at Veterinary Schools as well as the general public.
- This corporate has three commitments – Wellness Plans, Dentistry, and Fear-Free Clinics.
- They expect the current acquisition trend to continue for the next three to five years.
- Valuations are different among the various corporate buyers. Their add-back for DVM salaries is 20%. Another corporate buyer uses 22%. That can make a big difference in the purchase price on a large practice. Another example is adding back an office manager salary. That can vary significantly amongst corporate buyers. These are just two of ten examples of the differences they provided.
- Valuations have gone up over the past 5 years. Five years ago, they were buying practices at 4x to 5x EBITDA. They are now acquiring practices at a broader range of 6x to 9x EBITDA.
- They believe valuations are currently at their high peak with the expectation that they will start tapering back down to the 4x to 5x EBITDA range they saw five years ago.
- General Veterinary Practices that are in the sights of corporate acquisition teams represent 50% of all General Veterinary Practices. Corporates currently own 30% of all of these practices. The expectation is that once total corporate ownership hits 50%, the acquisitions will taper off dramatically. Corporates then may turn to specialty clinics. Note, we’re already seeing this in the marketplace. They also may focus on de novo practices.
In summary, the presentation confirmed what our thoughts have been:
- Corporates are here to stay.
- Corporate ownership will continue to grow.
- There are some good corporate buyers who treat their staff and DVMs well and there are others that do not.
- Corporates will go the de novo route when they can’t find a practice in an area they want to have a concentration.
- Valuations will begin to trend down in the not too distant future.
The number of corporate buyers in the market and the supply of practices corporates want all play into this. Whether good or bad, the corporate veterinary practice is here for the long haul.
This is just meant as an educational document and we are not promoting this or any other corporate buyer.
Saturday, May 19
Reserve your spot today! https://veterinary-transitions.eventbrite.com
- What does today’s marketplace look like for selling your veterinary practice?
- Tax strategies for a successful transition of your practice into retirement
- What should you take to prepare for a proper transition of your practice?
- What legal issues should you be aware of in a transition?
9 am to 5 pm. Dinner will follow shortly afterward.
Attendance cost for you and your significant other: $300
Refreshments, lunch, and dinner included.
Deluxe Lodge Guestroom Negotiated rate available for attendees.
More info & registration: https://bit.ly/practicefoundations
RSVP by Sept 29 – email email@example.com or call 614-753-1603.
Welcome and Registration: 6:00 p.m. – 6:30 p.m.
Seminar: 6:30 p.m. – 8:30 p.m. (Dinner to be served)
Location: Pacific Grill Events, 1530 Pacific Avenue, Tacoma, Wa 98402
The American Animal Hospital Association cordially invites you to attend this valuable seminar about planning your future. We have assembled a panel of experts that will give you a solid foundation of what you’ll need to do to prepare your hospital for transition. Don’t miss this opportunity to start planning your future. Contact us today to reserve your spot!
RSVP by September 25 – email firstname.lastname@example.org or call 614-753-1603.