Antitrust enforcement and consolidation in veterinary medicine

Private equity consolidating veterinary providers
In recent years, private equity has entered into the highly fragmented veterinary care industry. There has been a growing trend towards consolidation in veterinary care across the U.S., especially in emergency and specialty services. According to PitchBook, private equity veterinary deals in the U.S. from 2017 to 2022 totaled more than $45 billion.[1]

Corporate consolidators were estimated to control nearly half of the veterinary care market share in 2021, including a quarter of general practices and almost 75% of specialty practices such as emergency care, surgery, and cancer treatment. [2]

Consolidators include veterinarian-led groups, wealthy families, and veterinary groups with retail store-based clinic, as well as private equity-owned companies. Among the various types of consolidators, private equity firms are uniquely aimed at fast growth through mergers and acquisitions.[3]

Veterinary clinics are appealing to private equity firms and other investors because the industry’s financial reliability and expected growth. Clinics are mainly cash-based businesses with customers paying up front.[4]

The American Pet Product Association estimates that 66% of U.S. households owned a pet.[5] The market for veterinary care services is expected to continue growing, and by 2030 the industry may have a shortage of up to 55,000 veterinarians.[6]

The veterinary industry has “long been called recession proof” according to one investor.[7] One firm uncovered data from the 2008 financial crisis indicating that pet owners prioritized spending on their own pets’ health over their own prescriptions.[8]

Private equity’s push into veterinary care has been criticized for prioritizing profits over customers. A veterinarian told the Financial Times that a private equity firm increased the price of medication by 78%  after it acquired one clinic.[9] Another vet told Observer that vets at corporate practices “were pressured to do more and see more patients.”[10]

Even without private equity’s short-term motive, highly profit-driven veterinary care can come with concerns. In 2017, Bloomberg described pressure put on animal hospital chain VCA’s veterinarians to meet quotas and to increase the number and intensity of services during each pet visit. Veterinarians at another corporate chain reported pressure to vaccinate animals in excess of professional guidelines in order to increase revenues.[11]

Private equity’s short-term profit goals may also put veterinary workers at risk. “The largest single cost in any veterinary practice is its employees,” warned one veterinary provider and executive who is critical of private equity’s growing presence in the industry. “Thus, in order to maximize return to investors, a downward pressure on staff costs is highly likely. This can be achieved either by paying less per person or having fewer employees.”[12]

FTC enforcement against large veterinary mergers
In recent years, the Federal Trade Commission has taken some regulatory action to limit anticompetitive veterinary consolidation. First, in 2017 the FTC regulated the $9.1 billion acquisition of pet care company VCA Inc. by Mars Inc., requiring Mars to divest 12 clinics in 10 localities.[13] At the time Mars already owned other veterinary businesses including Banfield Pet Hospital, BluePearl, and Pet Partners.[14]

The FTC later also put limits on private equity firm JAB Holdings’ pet care growth.[15] The firm acquired its first veterinary provider in 2019, and by 2021, JAB viewed pet care as one of its most successful investment areas.[16]

JAB announced its first pet care purchase in February 2019, acquiring Compassion-First Pet Hospitals’ for $1.2 billion from private equity firm Quad-C Management Inc.[17]

The FTC stepped in after JAB announced plans to acquire National Veterinary Associates—an animal hospital network—from private equity firms Ares Management Corporation and OMERS Private Equity.[18] NVA owned more than 670 veterinary hospitals and 70 pet resorts in the U.S., Canada, Australia, and New Zealand.[19] Similar to the conditions when Mars acquired VCA, JAB was required to divest three clinics as part of the NVA acquisition.[20]

The FTC again put divestiture requirements on JAB’s veterinary growth in 2022, requiring the firm to divest 11 vet clinics before it could acquire SAGE Veterinary Partners and Ethos Veterinary Health.[21] The FTC also required that JAB give prior notice and receive approval before acquiring veterinary clinics in certain geographic markets where it already operates.[22]

According to the FTC, the JAB deals are “part of a growing trend towards consolidation in the emergency and specialty veterinary markets across the United States in recent years by large chains, including JAB, which regularly monitors local markets throughout the United States in contemplation of continued growth through potential small and large acquisitions of specialty and emergency clinics.”[23]

FTC enforcement and smaller veterinary mergers
The Federal Trade Commission’s previous actions against veterinary consolidation focused on larger monopoly mergers. But many smaller deals can also accumulate to have the same monopoly outcomes. The agency has recently taken a more aggressive towards posture towards small, but harmful, “stealth” acquisitions.[24]

Private equity firms have been active in rolling up smaller veterinary providers into larger chains, and may warrant scrutiny to assess whether they rise to the level of stealth consolidations that often escape antitrust regulation.

Compass Group Equity Partners’ CareVet has built a successful model centered on small practice acquisitions in markets with strong demand, according to Axios.[25]

Veterinary care chain VetCor has growth targets exceeding 100 annual acquisitions.[26] The company is backed by private equity firms Harvest Partners, Cressey & Company, and Oak Hill Capital Partners.[27]

Private equity-owned veterinary chains may also market themselves as buyers of individual practices. PetVet Care Centers has a section on its website targeted towards veterinarians seeking to sell.[28] The chain is owned by private equity firm KKR, running more than 450 veterinary clinics and hospitals across the U.S.[29]

Continue to scrutinize PE in animal care
Private equity will likely continue to perform large mergers and smaller roll-up acquisitions in veterinary care as the industry continues to grow. The Federal Trade Commission has taken appropriate action against large mergers in the past, and should consider  the potential anticompetitive impacts of smaller veterinary roll-ups.

Regulators should also consider related industries such as pet insurance and medical equipment. JAB owns multiple pet insurance businesses.[30] Its estimated revenues and premiums from pet insurance investments were more than $1.2 billion for 2023.[31] One veterinarian warned Observer, “If practices know you have insurance then they have carte blanche (to run up costs)” and consumers may be talked into procedures they otherwise could not afford.[32]

Consolidation of veterinary care may present a particular set of risks to the industry. Private equity’s short-term profit drive could harm consumers, veterinarians, and animals, especially as the industry continues to expand. Antitrust officials—as well as other policymakers and regulators—should put limits on veterinary consolidators to ensure that company finances go towards animal care and not to corporate profits.

[1] Ryan Prete. “Private Equity Snatches up Veterinarian Clinics amid Puppy Boom.” PitchBook, September 14, 2022. https://pitchbook.com/news/articles/pe-deals-veterinary-clinics-pet-care.

[2] Amanda McDavid. “Animal Health News & Notes for April 29, 2022.” Brakke Consulting, April 29, 2022. https://brakkeconsulting.com/animal-health-news-notes-for-april-29-2022/.

[3] Ivan Zak, DVM. “Roll Call: North America’s Biggest Veterinary Consolidators and Groups.” https://vetintegrations.com/, December 8, 2022. https://vetintegrations.com/insights/veterinary-consolidators/.

[4] Ryan Prete. “Private Equity Snatches up Veterinarian Clinics amid Puppy Boom.” PitchBook, September 14, 2022. https://pitchbook.com/news/articles/pe-deals-veterinary-clinics-pet-care.

[5] American Pet Products Association. “Latest Pet Ownership and Spending Data from APPA Reveals Continued Strength of National Pet Industry in the Face of Economic Uncertainty,” March 23, 2023. https://www.americanpetproducts.org/news/press-release/latest-pet-ownership-and-spending-data-from-appa-reveals-continued-strength-of-national-pet-industry-in-the-face-of-economic-uncertainty.

[6] Mars Veterinary Health. “Tackling the Veterinary Professional Shortage,” August 17, 2023. https://www.marsveterinary.com/tackling-the-veterinary-professional-shortage/.

[7] Ryan Prete. “Private Equity Snatches up Veterinarian Clinics amid Puppy Boom.” PitchBook, September 14, 2022. https://pitchbook.com/news/articles/pe-deals-veterinary-clinics-pet-care.

[8] Javier Espinoza, Yasemin Craggs Mersinoglu, Stefania Palma, and Antoine Gara. “Lipsticks, Lattes . . . and Now Labradors: JAB’s Bet on Pets.” Financial Times, July 12, 2022. https://www.ft.com/content/f32bee39-0ddf-47a3-8560-67838e7c9089.

[9] Javier Espinoza, Yasemin Craggs Mersinoglu, Stefania Palma, and Antoine Gara. “Lipsticks, Lattes . . . and Now Labradors: JAB’s Bet on Pets.” Financial Times, July 12, 2022. https://www.ft.com/content/f32bee39-0ddf-47a3-8560-67838e7c9089.

[10] Linda Carroll. “Veterinary Practices Are Increasingly Corporately Owned, and Pets Owners Pay the Price.” Observer, March 19, 2023. https://observer.com/2023/03/veterinary-practices-are-increasingly-corporately-owned-and-pets-owners-pay-the-price/.

[11] Jason Clenfield. “The High-Cost, High-Risk World of Modern Pet Care.” Bloomberg.com, January 5, 2017. https://www.bloomberg.com/news/features/2017-01-05/when-big-business-happens-to-your-pet.

[12] Elizabeth Davidow. “Private Equity – What Veterinarians Should Know.” The Veterinary Idealist, February 12, 2020. https://vetidealist.com/private-equity-veterinarians/.

[13] Federal Trade Commission. “FTC Alters Final Consent Order in Response to Public Comments, Preserving Competition for Specialty and Emergency Veterinary Services in 10 U.S. Localities,” December 19, 2017. https://www.ftc.gov/news-events/news/press-releases/2017/12/ftc-alters-final-consent-order-response-public-comments-preserving-competition-specialty-emergency.

[14] VCA Animal Hospitals. “Mars, Incorporated Completes Acquisition of VCA Inc.,” September 12, 2017. https://vcahospitals.com/press-center/vca-news/mars-acquisition.

[15] Javier Espinoza, Yasemin Craggs Mersinoglu, Stefania Palma, and Antoine Gara. “Lipsticks, Lattes . . . and Now Labradors: JAB’s Bet on Pets.” Financial Times, July 12, 2022. https://www.ft.com/content/f32bee39-0ddf-47a3-8560-67838e7c9089.

[16] Judith Evans and Arash Massoudi. “JAB Seeks to Raise $5bn Fund to Invest in Petcare.” Financial Times, October 6, 2021. https://www.ft.com/content/93a23966-1b26-4e7b-aa0c-9ff2654e9990.

[17] Leila Abboud. “JAB Enters Pet Industry with Bid for US Veterinary Clinics.” Financial Times, February 25, 2019. https://www.ft.com/content/223dba84-390b-11e9-b72b-2c7f526ca5d0.

[18] JAB Holding Company. “Ares Management Agrees to Sell NVA, the Leading Independent Veterinary Platform, to JAB Investors,” June 17, 2019. https://www.jabholco.com/documents/6/Press%20release%20NVA%20Acquisition.pdf.

[19] American Veterinary Medical Association. “NVA Clinics Purchased by German-Owned Company,” August 14, 2019. https://www.avma.org/javma-news/2019-09-01/nva-clinics-purchased-german-owned-company.

[20] Federal Trade Commission. “FTC Approves Final Order Imposing Conditions on Veterinary Service Providers Compassion First and National Veterinary Associates,” April 10, 2020. https://www.ftc.gov/news-events/news/press-releases/2020/04/ftc-approves-final-order-imposing-conditions-veterinary-service-providers-compassion-first-national.

[21] Javier Espinoza, Yasemin Craggs Mersinoglu, Stefania Palma, and Antoine Gara. “Lipsticks, Lattes . . . and Now Labradors: JAB’s Bet on Pets.” Financial Times, July 12, 2022. https://www.ft.com/content/f32bee39-0ddf-47a3-8560-67838e7c9089.

[22] Federal Trade Commission. “FTC Takes Second Action Against JAB Consumer Partners to Protect Pet Owners from Private Equity Firm’s Rollup of Veterinary Services Clinics,” June 29, 2022. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-takes-second-action-against-jab-consumer-partners-protect-pet-owners-private-equity-firms-rollup-of-veterinary-services-clinics.

[23] Federal Trade Commission. “FTC Takes Second Action Against JAB Consumer Partners to Protect Pet Owners from Private Equity Firm’s Rollup of Veterinary Services Clinics,” June 29, 2022. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-takes-second-action-against-jab-consumer-partners-protect-pet-owners-private-equity-firms-rollup-of-veterinary-services-clinics.

[24] Thomas Wollmann. “Is the FTC Targeting ‘Stealth Consolidation’ by Private Equity?” The University of Chicago Booth School of Business, December 15, 2023. https://www.chicagobooth.edu/review/is-ftc-targeting-stealth-consolidation-private-equity.

[25] Sarah Pringle. “Investors Chase Pet Care Deals.” Axios, March 4, 2022. https://www.axios.com/2022/03/04/pet-care-lures-private-equity.

[26] Bloomberg Law. “How VetCor Streamlines a High Volume of Acquisitions,” August 15, 2023. https://pro.bloomberglaw.com/insights/transactions/how-vetcor-streamlines-a-high-volume-of-acquisitions/.

[27] PR Newswire. “Oak Hill Capital Partners Leads Recapitalization of VetCor alongside Harvest Partners, Cressey & Company, and Management,” June 15, 2018. https://www.prnewswire.com/news-releases/oak-hill-capital-partners-leads-recapitalization-of-vetcor-alongside-harvest-partners-cressey–company-and-management-300666843.html.

[28] National Network of Veterinary Hospitals. “PetVet Care Centers.” Accessed January 22, 2024. https://www.petvetcarecenters.com/site/home.

[29] Carmen Arroyo and Paula Seligson. “KKR Nears $2.3 Billion Private Loan for PetVet Recapitalization.” Bloomberg.com, October 24, 2023. https://www.bloomberg.com/news/articles/2023-10-24/kkr-nears-2-3-billion-private-loan-for-petvet-recapitalization.

[30] Javier Espinoza, Yasemin Craggs Mersinoglu, Stefania Palma, and Antoine Gara. “Lipsticks, Lattes . . . and Now Labradors: JAB’s Bet on Pets.” Financial Times, July 12, 2022. https://www.ft.com/content/f32bee39-0ddf-47a3-8560-67838e7c9089.

[31] Ian Johnston and Yasemin Craggs Mersinoglu. “JAB Tightens Grip on US Pet Care Market with Insurance Deal.” Financial Times, June 20, 2022. https://www.ft.com/content/3e3c37ea-5643-44f1-8912-2dc09a2dceb9.

[32] Linda Carroll. “Veterinary Practices Are Increasingly Corporately Owned, and Pets Owners Pay the Price.” Observer, March 19, 2023. https://observer.com/2023/03/veterinary-practices-are-increasingly-corporately-owned-and-pets-owners-pay-the-price/.