It is evident from conversations with vets and the lack of recent transactions that the veterinary corporates, particularly the small animal veterinary corporates, have stopped buying practices and as a result competitive tension in the market has dried up.
As result practice vendors arguing that their practice is worth a higher multiple because of what corporates will pay is an argument that can be dismissed because of lack of current sales evidence. Rather it’s the case of what individual veterinarians are prepared to pay for a practice. This is a different market than the corporate market. Good practices still sell at realistic prices.
The reasons are that:
1. The increasing proportion of female vets with families who are only prepared to work limited family friendly hours has placed a growing strain on practice rosters.
2. Those vets who sold their practices relatively early in the corporate phase have passed a point at which their legal obligations to remain employed by the acquirer of their practice has ceased. They are now doing to their employing corporates what female vets did to them by specifying the days and times which they are prepared to work.
3. Given the increasing difficulty of attracting veterinary employees to fill all the rosters in their existing practices the corporates have lost the stomach to buy more practices because that will only add to their problem. With no competing buying pressure from other corporates, the higher EBITDA multiples that the corporates were paying have disappeared.
4. In this market the real buying power is slowly but surely reverting to existing vets; particularly vets married to other vets who can between them fill a reasonable proportion of a roster in a good practice.
We expect these trends to continue for the foreseeable future.
We see these trends increasing in respect of corporate mixed animal practices because the distance between practices and the differences in the nature of practices ie, dairy related, pig related, etc. make it even more difficult to shift resources between practices. Indeed the reason that a number of older vets gave for selling their mixed animal practices to a corporate was that they were having difficulty in staffing their practices. Naturally there are also issues of bad shoulders and injured bodies from years of dealing with large animals.
The APIAM Animal Health Ltd share price chart over the past 12 months is illuminating as is the share price chart of Greencross Ltd.