Betting on Vets
The Post‘s Nicole Sullivan spotted something I’d completely missed on the local scene, namely, that four of five animal hospitals in the CBRM are now owned by VetStrategy.
The Northside Animal Hospital, the Sydney Animal Hospital and the two Animal Medical Centres (AMC)—in Sydney and Reserve Mines—are now all owned by what is described as an Ontario-based company, although only three of these are actually operating because VetStrategy’s first move upon taking ownership of the two AMC hospitals was to close the one in Reserve Mines.
AMC clinic in Sydney, NS.
Don’t worry, it’s absolutely only temporary, VetStrategy “a hundred percent” wants to reopen the Reserve Mines hospital, according to Marsha White, the company’s Newfoundland-based regional director of operations for Atlantic Canada, it’s just that there is currently a shortage of vets. (Employees of the Reserve Mines clinic have been reassigned to the other clinics.)
VetStrategy, which now owns 350 animal hospitals, was launched in 2006 with the aim of “taking the management and operations side of animal hospitals off the doctors.” Or as White puts it:
We truly do just partner with them to help with the business aspect of it because normally the DVM (doctor veterinary medicine) who owns it at the time wants to retire or just relinquish doing that business acumen so they can focus on doing what they love to do which is practising medicine.
(How does one relinquish one’s business acumen? More importantly, why would one relinquish one’s business acumen? Does one wake up one morning thinking, “For my third act, I think I’ll be financially illiterate?” Also, buying a business is not the same as “partnering” with a business although, I get it, it sounds nicer.)
VetStrategy’s tagline, according to White, is:
You were made to save animals, we take care of the rest.
From Pizza to Pets
According to her LinkedIn profile, White has only been with VetStrategy since 2018. Prior to that, she was with Pinehill Holdings in Newfoundland, where she oversaw operations in 12 franchise restaurants (she doesn’t name the franchise, but her “honors and awards” include a 2004 “Supervisor of the Year” title from Domino’s Pizza Canada). While with Pinehill she was:
Marsha White (Source: LinkedIn)
Her first position with VetStrategy was director of operations, where she was:
In 2020 she became VetStrategy’s Talent Acquisition Manager, responsible for “sourc[ing] and recruit[ing]” vets and in 2021, she assumed her current position. In the About section of her LinkedIn profile she says:
Okay, we get it, you are good at making money. But should the drive to “maximize profitability” be the guiding principle behind an animal hospital? My feeling is no, but my feelings are irrelevant because—and here’s a piece of information not in Sullivan’s story—VetStrategy is part of a private equity veterinary juggernaut.
Allow me to explain.
Roll-Up the Sector to Win!
VetStrategy was founded in Vaughan, Ontario in 2006 by Orin Litman, Jon Shell and Litman’s wife, veterinarian Michelle Cutler.
Around 2012, Justin MacCormack of Toronto-based private equity firm Imperial Capital, who knew Shell from “their days at McKinsey & Co,” began acting as “a friendly advisor” to VetStrategy, helping “with its growth plans.” In 2013, Shell decided to move to Australia and MacCormack convinced Imperial to buy Shell’s VetStrategy stake through two of its investment funds. (Imperial ended up with 70% of VetStrategy, although I can’t say whether this was Shell’s share or if Imperial subsequently added to its position.)
Under Imperial’s ownership, VetStrategy grew from having 15 clinics in four provinces to become Canada’s largest veterinary practices company with more than 165 clinics in nine provinces.
It was under Imperial’s ownership that VetStrategy, in 2019, acquired the two AMC clinics in CBRM. The following year, 2020, it acquired the Northside Animal and Sydney Animal Hospitals. But:
In August 2020, after a brief sale process, Imperial announced that it sold its stake in VetStrategy to Boston-based Berkshire Partners. It was Imperial’s second-largest deal after the 2018 sale of a major interest in Toronto-based Dental[c]orp., which acquires dental practices.
I know all these folksy details about VetStrategy because Imperial won the 2021 PE Regional Impact Award from the Canadian Venture Capital and Private Equity Association (CVCA) for the deal which, according to PE Hub, saw Berkshire Partners (no relation to Warren Buffet’s Berkshire Hathaway) pay $1.4 billion for VetStrategy. (In passing, can you imagine the CVCA awards ceremony? It would be like turning the part of the Oscars where they introduce the accountants into the whole show.)
Between August 2020 and September 2021, VetStrategy acquired another 110 clinics.
And then, in September 2021, VetStrategy merged with IVC Evidensia, a European veterinary care provider with—wait for it—2,000 clinics across Europe. (IVC was a British firm that bought up hundreds of small vet practices across the UK before being acquired by Sweden’s Evidensia, which is owned by the EQT, a Swedish private equity firm.)
If you can drag your gaze from the cute kitten, you’ll note the offer to vets is not “Partner with us” but “Sell your clinic.”
As the Globe and Mail explained:
Berkshire’s investment will be rolled into an ownership stake in IVC…It will also get a seat on IVC’s board of directors. In February, IVC raised US$4.2-billion in an equity round led by U.S. private equity firm Silver Lake and multinational food producer Nestlé that valued the company at US$14.5-billion. According to media reports, the financing resulted in IVC’s parent company, abandoning plans to list the company’s shares on the London Stock Exchange.
Which means four of our five local veterinary clinics went from being owned by a Canadian private equity firm to being owned by an American private equity firm to being owned by a Swedish private equity firm in the space of a little over a year.
It also means, if Sullivan’s 350 figure is correct (and I have no reason to think it’s not) that VetStrategy has acquired another 75 clinics since September 2021 as part of what is called, in the private equity world, a “roll-up.”
Drug prices
I got some insight into what’s happening—and likely to happen—locally from this 2021 Financial Times article by Barbara Crockett, “Going to the vet: what happens when private equity invests in a cottage industry,” part of which reads:
“It’s a giant acquisition machine,” says a former employee. “IVC was just minting millionaires across the UK.” A vet who sold his practice to the group says he “almost fell off his chair” on hearing how much it was offering. The vet, who requested anonymity, says IVC mistook his shock for hesitation — and increased its offer.
PE firms don’t tend to broadcast their ownership of veterinary clinics, though. Writes Crockett:
To the outside world, the transformation of hundreds of vet practices has been largely invisible. Some of its surgeries emphasise their longstanding local connections and family-run approach and IVC avoids rebranding them when it takes over. “People like to take their dog to the local vets and not feel like it’s a corporate machine,” one adviser close to the company said.
Which certainly jibes with what VetStrategy’s Marsha White told Sullivan:
We don’t have a single logo. We don’t change anything when we partner with these hospitals. The staff are the same, they practice medicine the same.
It’s actually a tad creepy—in a FAQ aimed at vets considering selling their clinics, IVC Evidensia poses the question: How will my staff be impacted? And the answer is:
Source: IVC Evidensia FAQ (https://ivcevidensia.com/sell-your-clinic/)
As for your clients:
Source: IVC Evidensia FAQ (https://ivcevidensia.com/sell-your-clinic/)
But clients do, apparently, notice some things, like their local veterinary clinics closing or the price of medications skyrocketing. Writes Crockett:
On buying a practice, IVC centralises procurement and finance, and appoints business support managers to oversee practices. IVC sets financial targets for practices that several vets described as challenging. It recommends drug prices centrally, but says local practice management ultimately decides what to charge. However, the effort to meet targets can lead to steep price increases.
One vet in southern England says the price of Metacam, a widely dispensed anti-inflammatory painkiller, rose at their practice by 28 per cent to £82.79 [CAD$131.91] for a 100ml bottle after IVC took over. The price of ProZinc, an insulin for diabetic cats, rose 39 per cent to £99.34 [CAD$158.28], the vet says, and Fortekor, a heart medication, rose more than 78 per cent to £76.85 [CAD$122.44].
Equally concerning, in an area with elevated poverty levels like ours:
The surgeries run by IVC have also stripped back an informal practice of discounting fees for struggling patients, says another former practice owner, who sold to IVC.
Crockett did speak to vets who felt the advent of IVC was a good thing, that it brought access to cutting-edge technologies and allowed vets, particular female vets, a better work/life balance.
But for a private equity firm hell bent on squeezing every ounce of profit it can from an animal hospital, the point of introducing cutting-edge treatments is to charge cutting-edge prices. And while I can see that achieving a reasonable work/life balance as the owner of a small animal hospital might be a problem, I have to think allowing private equity companies take over the entire veterinary care industry is an awfully drastic solution.
Ireland
Jackie Cahill
Not everyone is taking the arrival of PE in the veterinary sector lying down. The “political backlash” against private equity ownership of vet clinics has been “particularly strong” in Ireland, according to Crockett.
In 2021, Jackie Cahill, the member for Tipperary in the Irish Parliament (Dáil Éireann), introduced a private member’s bill to amend the Veterinary Practice Act 2005 to “prohibit ownership of veterinary practices by persons, other than a veterinary practitioner.” (Cahill belongs to Fianna Fáil, which forms part of Ireland’s governing coalition.) The bill is currently at the third or committee stage in the lower house. Cahill spoke to his bill during the second stage and I’m going to quote him at length because he does a good job outlining the problems with private equity ownership of veterinary clinics:
Monopolisation by corporate bodies will lead to a narrowing of competition, an increase in fees and a reduction in credit terms to the public. Twenty-four service throughout the country will be compromised. Inefficient, out-of-hours cover in rural areas and significant increases in fees for the provision of services will have a direct impact on animal welfare. The experience of the UK corporate model suggests the discontinuation of large animal veterinary services on a 24-hour basis. Cherry-picking of profitable services and clients, with a significant emphasis on urban areas with a large number of small animal practices where they have the ability to increase the profit margin significantly, and discontinuation of voluntary work in agricultural shows, point-to-points and the care of injured wildlife will all be consequences of corporate ownership of practices. There will also be the discontinuation of participation on a voluntary basis on State bodies and committees.
Veterinary practitioners employed by corporate bodies will be constrained to use only drugs and services of virtually integrated corporate groups that own pharmaceutical companies, laboratories, referral hospitals and crematoria, which will compromise their professional discretion. They will be required to work to protocols established by corporate bodies to maximise returns. Investigation and treatment regimes will be dictated by management to maximise profits. This will compromise ethical standards. Corporate entities will be driven by the need to return profits to their investors. It will lead to a deprofessionalisation of the profession.
There’s more to this story, of course, the encroachment of private equity into veterinary care is just one aspect of what is often called “the financialization of everything.” PE firms are targeting dental practices and home care and housing and more, as illustrated by this headline from the most recent issue of Mother Jones: “Everything Everywhere All at Once: How Private Equity Rules Your World.”
It will take more than awareness to slow PE’s roll, but awareness is where it starts, and I have to say thank you to Nicole Sullivan for raising mine.
Ahem
I did it again, I spent so much time on one topic I had none left over for random observations, so next week I will attempt to be make up for this by being as random as humanly possible.
