If You Like Physician Practices: You will Love Veterinary

Contributed by CFO Consulting Partners

Following our introductory article introducing our healthcare practice, we followed up with an article that discussed the changing dynamics of physician practices.

As we serve our clients in healthcare practices, we are seeing significant opportunity within the veterinary practice area. This article titled – If You Like Physician Practices: You Will Love Veterinary, will tell you why.

While there are some larger corporations leading the consolidation of vet practices, think Mars, NVA (National Veterinary Associates) Blue River and VetCor, they generally target groups that have had some level of consolidation already. Mars targeted some of the larger consolidated groups such as Blue Pearl, Pet Partners, Banfield and VCA, while consolidators like Blue River out of Chicago will target individual hospitals. Groups like Veterinary Practice Partners and Community Veterinary Partners, both in Eastern Pennsylvania, will invest in and co-own practices with current owners.

While private equity has been active in vet consolidation, they are also investing in the consolidators, leaving early stage consolidation to others. Earlier this year Oak Hill Capital Partners, Harvest Partners and Cressey & Company recapitalized VetCor. Morgan Stanley Global Equity Partners invested in Pathway Partners Vet Holding. In 2017, Summit Equity sold NVA to Ares and OMERS and KKR invested in Pet Vet Centers. NVA and Pet Vet Centers valuations were rumored at EBITDA multiples of 13-15x while the Mars acquisition of NVA was at 18.2x according to bankers.

According to Forbes/Merger Market, smaller hospital acquisitions are fetching 8-10 multiples while smaller single practices in less desirable locations are getting 6-7x. A typical larger vet group can have EBITDA margins in the area of 15-20%, with smaller practices 7-18%. According to Simmons Veterinary Practice Sales and Valuations the industry average is 10-12%.

So, what we are learning? The vet business is healthy with an industry average of 10-12% EBITDA margins. Consolidators can acquire practices in the low to mid-teens multiple range, while growing margins as a result of creating a consolidation platform to 15-20% while increasing the valuation multiple as well. This is a recipe for good returns for investors while providing significant exit returns for sellers.

Also, it appears that the competition for buying opportunities is easier than that of physician practices as vet practices are in an earlier stage of consolidation than physician practices with the absence of hospital competition that exists in the physician practice area. Also, people love their pets and are willing to pay for more complex procedures that continue to develop in areas such as orthopedics, neurology and oncology.

While the vet business still has some of the “professional corporation” regulatory issues faced by physician practices, there is significantly less liability, payor issues (Medicaid, Medicare, private payor), and general regulatory issues to contend with than that of a physician practice. On a simplistic basis, these advantages seem to accrue while providing similar investment returns between physician practice and vet practice investments.

CFO Consulting Partners’ healthcare practice is here to help you as we are well versed in hospital, medical and veterinary practices. We can assist vet practices to prepare for an exit while providing private equity with assistance to prepare a consolation strategy, identify acquisitions and assist with due diligence and integration.

By John DeLorenzo, Director, CFO Consulting Partners


CFO Consulting Partners LLC is a team of senior financial executives. We provide a broad range of financial management services to public and private companies.  We work for CEOs, CFOs, as well as audit committees and boards.

Our mission is to apply our consultants’ considerable collective experience to resolve client issues in a professional and efficient manner.

Further information is available at: http://www.cfoconsultingpartners.com/

Eight Red Flags that your Board Financial Package is Failing to Support Board Needs

One of the goals of boards is to oversee the financial performance of the company or companies to which they are associated. Informative, transparent financial statements are necessary for boards to discharge those duties. If your board financial package lacks one or more of the following, there would likely be a deficiency in the board’s oversight function.

– The financial package should contain the three basic financial statements – P&L, Balance Sheet and Cash Flow. The benefits of the P&Ls and balance sheets are fairly well known; however, the cash flow statement may not be as well known. The cash flow statement answers the question, “Where did our money go?”

– The package should contain accounts receivable and accounts payable agings.

– Critical notes to the financial statements should be included to explain complex accounting transactions.

– The P&L and balance sheet should be compared to budget.

– The package should contain reasons for variances from budget, and if it does, the explanations should be business reasons, not accounting reasons.

– The package should list the capital expenditures during the month and show how they match up against the capital budget.

– The package should contain key business drivers.

We suggest CEOs and board members speak to a financial management consulting firm to evaluate the adequacy of their board packages. Such firms can review your board packages and make targeted suggestions for improvement.

By Allan Tepper, Senior Managing Director, CFO Consulting Partners

Further information is available at: http://www.cfoconsultingpartners.com/