The COVID pet boom is unleashing more opportunities for investment across the burgeoning veterinary care industry, sources tell Axios.
Why it matters: Veterinary care is one of the largest pockets of spending for pet parents — and arguably the most important. And, like medical care for humans, it faces a big labor shortage.
- The market anticipates a 33% increase in pet health care spending over the next decade, but a shortage of nearly 15,000 veterinarians will likely still exist by 2030, according to a study published this week by MARS Veterinary Health.
Driving the news: North Castle Partners has kicked off a sale process for Encore Vet Group, a Saratoga Springs, New York-based network of veterinary clinics, sources tell Sarah.
- Harris Williams is advising on the sale of Encore, marketing approximately $52 million of EBITDA for the 63-location platform.
Yes, and: Compass Group Equity Partners’ CareVet is poised to hit the market later this year via Lincoln International, sources add.
- Led and co-founded by former L Catterton operating partner Greg Siwak just four years ago, CareVet is now close to some $50 million of EBITDA, sources say.
- CareVet has built a successful model centered on small practice acquisitions in markets with strong demand, scaling them with new vet hires. This lends to cheaper acquisitions and typically a large ROI, one source notes.
- In contrast, most vet platforms grow by acquiring larger specialty or general practice group practices, where they can generate more cost synergies while less at-risk if one vet leaves a practice.
State of play: Traditional vet chains have long enticed private equity investment at big price tags (and they keep ticking higher).
- Deal multiples for general practice vet groups are trading around the upper teens to 20x EBITDA, while specialty platforms are fielding as much as 25x EBITDA.
- Most recently on the general practice side, L Catterton invested in Alliance Animal Health at a $750m-$800m valuation, based upon $39 million of EBITDA, sources told Axios in December.
- Large industry consolidators (and eventual IPO candidates) include JAB Investors’ NVA, TSG Consumer Partners’ Pathway Vet Alliance and Europe’s IVC Evidencia, backed by Silver Lake and EQT.
Meanwhile, early-stage investors are injecting fresh capital into emerging vet tech models looking to consumerize the industry.
- The Vets, an at-home vet tech company, scored $40 million in January in a funding round led by Target Global.
- Warburg Pincus in October injected $170 million into Bond Vet, a tech-powered urgent care startup not unlike a CityMD for pets.
- Modern Animal, a Los Angeles startup banking on pet parents’ demand for convenience and affordability, raised $75.5 million in July 2021.
- Small Door Veterinary, a New York-based membership model, raised $20 million in Series A funding led by Toba Capital in June 2021.
- “There is a lot of modernization that still needs to be done, but some [startups] are more focused on tech hospitality versus care — you need a balance of both,” says one source.
The bottom line: Whether an established industry player or a newcomer, veterinarians are facing more volume than they can handle. Expect more M&A, investment, and ultimately public market activity to follow.
North Castle declined to comment, while Compass Group, Harris Williams and Lincoln International didn’t return requests for comment.
Sarah Pringle co-authors the Axios Pro Health Tech deals newsletter. Start your free trial at AxiosPro.com.
The COVID pet boom is unleashing more opportunities for investment across the burgeoning veterinary care industry, sources tell Axios. Why it matters: Veterinary care is one of the largest pockets of spending for pet parents — and arguably the most important. And, like medical care for humans, it faces a big labor shortage. The market anticipates a 33% increase in pet health care spending over the next decade, but a shortage of nearly 15,000 veterinarians will likely still exist by 2030, according to a study published this week by MARS Veterinary Health. Driving the news: North Castle Partners has kicked off a sale process for Encore Vet Group, a Saratoga Springs, New York-based network of veterinary clinics, sources tell Sarah.Harris Williams is advising on the sale of Encore, marketing approximately $52 million of EBITDA for the 63-location platform.Yes, and: Compass Group Equity Partners’ CareVet is poised to hit the market later this year via Lincoln International, sources add. Led and co-founded by former L Catterton operating partner Greg Siwak just four years ago, CareVet is now close to some $50 million of EBITDA, sources say. CareVet has built a successful model centered on small practice acquisitions in markets with strong demand, scaling them with new vet hires. This lends to cheaper acquisitions and typically a large ROI, one source notes.In contrast, most vet platforms grow by acquiring larger specialty or general practice group practices, where they can generate more cost synergies while less at-risk if one vet leaves a practice. State of play: Traditional vet chains have long enticed private equity investment at big price tags (and they keep ticking higher). Deal multiples for general practice vet groups are trading around the upper teens to 20x EBITDA, while specialty platforms are fielding as much as 25x EBITDA. Most recently on the general practice side, L Catterton invested in Alliance Animal Health at a $750m-$800m valuation, based upon $39 million of EBITDA, sources told Axios in December. Large industry consolidators (and eventual IPO candidates) include JAB Investors’ NVA, TSG Consumer Partners’ Pathway Vet Alliance and Europe’s IVC Evidencia, backed by Silver Lake and EQT. Meanwhile, early-stage investors are injecting fresh capital into emerging vet tech models looking to consumerize the industry. The Vets, an at-home vet tech company, scored $40 million in January in a funding round led by Target Global.Warburg Pincus in October injected $170 million into Bond Vet, a tech-powered urgent care startup not unlike a CityMD for pets. Modern Animal, a Los Angeles startup banking on pet parents’ demand for convenience and affordability, raised $75.5 million in July 2021. Small Door Veterinary, a New York-based membership model, raised $20 million in Series A funding led by Toba Capital in June 2021. “There is a lot of modernization that still needs to be done, but some [startups] are more focused on tech hospitality versus care — you need a balance of both,” says one source.The bottom line: Whether an established industry player or a newcomer, veterinarians are facing more volume than they can handle. Expect more M&A, investment, and ultimately public market activity to follow.North Castle declined to comment, while Compass Group, Harris Williams and Lincoln International didn’t return requests for comment. Sarah Pringle co-authors the Axios Pro Health Tech deals newsletter. Start your free trial at AxiosPro.com.