Transcript UK corporate veterinary practices

Corporate veterinary practice in the
UK, the Netherlands and Switzerland
UEVP – November 2009
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What is corporate practice?
A corporate veterinary practice is one where the practice is owned
and operated by a company rather than by an individual, or a
group of individuals.
In the UK, these are invariably limited companies
This is widespread in other professions in the US and the UK;
eg. opticians, dentists, pharmacists
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Three different models
 1. consolidators
 2. joint venture partnerships
 3. large, independent groups
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U.S. VETERINARY PRACTICES
Type of Practice.
 Large animal exclusive
1,134
 Large animal predominant
1,219
 Mixed animal
2,258
 Small animal predominant
3,122
 Small animal exclusive
17,011
 Equine
1,323
 unspecified
717
------------------------------------Total 27,123
US % corporate = c.6% of total
Source Vet Economics
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US - history
 Corporate veterinary practice began in the US, in 1955, with
Banfield which now has 750 clinics, employing more than
2,000 vets
 The US market is also shared by VCA
(Veterinary Clinics of America) which has 470 clinics,
employs c. 1,800 vets and also owns Antech Diagnostics
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UK - history
 UK corporate practice began in 1999 when the RCVS
relaxed its rules on practice ownership to allow non-vets to
own practices.
 Two initial consolidators began the process:
CVS and VPI.
 VPI collapsed and was absorbed into CVS in 2006
 CVS is now, by far, the biggest of the corporate groups
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Corporate practice in the UK
 Approx 3,700 practices in UK, seeing small animals.*
 Approx 400 practices considered to be ‘corporate’ in
ownership
 Approx 11% practices are ‘corporate’
 By 2020, I would envisage that around 20% will be
‘corporate’ at the current rate of conversion/senior
retirement allowing for a drop in overall numbers
* Source – Vetfile October 2009
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3 different styles of ‘corporate’ practice
UK examples
• Consolidators
– CVS Ltd
– Pet Doctors
• Joint venture partnerships
– Vets4Pets
– Companion Care (CC)
– +/- Medivet
• Large groups with organic growth
– Goddard Veterinary Group
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UK Corporate groups
 CVS Ltd. (164 +1)
 Medivet (65 branches +1)
 Companion Care (54 branches +1)
 Vets4Pets (45 branches +1)
 Pet Doctors (35 branches [ was 37] +1)
 Goddard Veterinary Group (34 branches+1)
UK % corporate practices =11%
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consolidators
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consolidators
 Practice group growth by acquisition
 sometimes single practices
 sometimes whole groups
 In the UK, recent graduates are largely unwilling to buy into
partnership
 In the UK, the consolidators have been seen as the primary
exit route for principals/partners wishing to sell
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CVS
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Consolidators
– CVS – 164 branches
• CVS Ltd - Sovereign Capital – only group with national coverage
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in the UK
Floated on AIM in 2007
Still acquiring practices – scale now working against the central
admin office
Questions about real-time profitability buried behind escalating
borrowing
MD/FD work-out period ending 2009
Market expects divestment when new board takes over
Owns three laboratories and equine referral hospital
Some unrest amongst practice staff will cause internal problems
while externally, CVS moves from strength to strength
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Pet Doctors
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Consolidators
Pet Doctors – 35 branches
 Pet Doctors started in 1999
 Two directors: Garret Turley, David Grant
 Diversified to purchase Wey Referrals + Greendales
laboratory
 Smaller practices, 2 man rather than 3-4+
 Location: clusters in Surrey, Sussex, Hants, Essex
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joint venture partnerships
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Joint-venture partnerships
 As the name suggests, the veterinarians enter into a joint
venture with the holding company providing the infrastructure and some/most of the investment capital
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JV Partnerships
• Vets4Pets and Companion Care both share the same financial
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model ( ex SpecSavers opticians)
Holding company forms umbrella over several ‘stand alone’
limited businesses
Min investment for 2 partners, (vet+ vet, vet + nurse)
£30k = 10% ‘A’ shares
JV partners + holding company share the balance of the ‘A’ shares,
holding company retains all the ‘B’ shares. Over 5 yrs, JV partners
expected to have bought all ‘A’ shares and profit share is then
payable
At £30k investment, partners earn £35k pa + dividends where
payable. Most successful (Companion Care) JV partners currently
earn £200,000+ pa
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JV Partnerships
• Holding company provides all necessary services:
financial + investment, financial reporting, administrative,
legal, HR, recruitment, property, training, advertising &
marketing
• Fee payable for these services - 15% t/o
• Holding company negotiates discounts from suppliers – may
be shared with practices
• No diversification into referral or laboratories
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vets4pets
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JV partnerships –
Vets4Pets – 45 branches
• Vets4Pets shares are now 100% owned by managing director
• Messy divorce from other partners
• Slower start but has accelerated recently
• Industry belief that delays were due to planning difficulties
• Location: predominantly N of England and N Ireland
New strategy of acquisition through sister company, Autumn 2009
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Companion Care
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JV partnerships –
Companion Care
- 54 branches
 Companion Care is a division of Pets at Home (PaH), owned
by Bridgepoint.
 Bridgepoint had planned to sell PaH in 2008/9 but
performance too strong so will retain.
 CC could be spun off.
 CC’s ambition is to acquire Vets4Pets business as part of
expansion plan.
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JV Partnerships
- Companion Care
 Of the 54 CC surgeries, 50 are sited in Pets at Home
stores so, currently, this may be more difficult to arrange
in market. Jane Balmain (MD) provides very strong
leadership and it is widely held that she is the main
reason for CC success to date
 If Vets4pets could be acquired, this would give
Companion Care c. 100 practices and national
distribution
 Location: England (mostly S)
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Medivet –the veterinary partnership
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JV Partnerships –
Medivet – 65 branches
Medivet started with South African investment.
Five South African partners
Has a reputation for aggressive marketing and high prices*
Large no of certificate holders ensures that most referral is carried
out in-house
• No laboratory
• Location: London, SE and Essex
• Converted from consolidation model to a form of JV partnership
in 2007
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Has recently nationally price-matched certain procedures to
generate more volume to take up slack capacity
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large, independent groups
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large, independent groups
 These may not, technically, be recognised as corporates but
are run as corporates
 Good examples would be:
 Goddard Veterinary Group
 Best Friends group
 Vets Now (very different model, providing out-of-hours cover)
+ others
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Goddard Veterinary Group
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Goddard Veterinary Group – 34 branches
 Current owner/ director is Philip Goddard MRCVS
 Head office based in Wanstead, attached to original veterinary
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hospital
Family business started by Philip’s father
Privately owned, although registered as a Limited Company
possibly for tax reasons
Also owns Stone Lion Referrals in Wimbledon
( another of the hospital bases), and an in-house laboratory
Offers night service from Wimbledon, to other local practices
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Large groups with organic growth
Goddard Veterinary Group
 Three clusters of satellite surgeries, each surrounding a
veterinary hospital in Wanstead (18), Northolt (8) and
Wimbledon (8)
 Significant economies of scale with expensive equipment
needed for just three out of 34 surgeries + staff economies
with undemanding rotas - valuable in attracting staff
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Netherlands
 Figures drawn from In Practijk – a leading veterinary journal
in The Netherlands
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Netherlands
3,200 vets working in practice
 C. 1,300 veterinary practices
 C. 900 practices seeing small animals
 C. 700 practices are owned by a single principal
 > 425 practices are multiply owned
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C.
49% ♂ : 51% ♀ ( owners still predominantly ♂)
 Practices becoming bigger, through mergers, and have
more satellite branches
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Netherlands
 Average # FT vets/practice = 5.0 ( 2.4 in 1998)
 With recent graduates (more female vets), there is less
appetite to own a practice
 Within 10 years, many male principals will wish to retire
and some practice sales to ‘corporates’ have taken place
 Not every practice is interesting for acquisition and many
vets fear that they will have to close the business without
succession
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Netherlands - corporates
 Over the last four years, three ‘corporates’ have developed:
 Dierendokters – 7 clinics
 Pet Wellness Center - 1 in 2009, 6 more in 2010
 Elke Dierenarts - 4 clinics
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Dierendokters - Amsterdam
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Pet Wellness Center-Amersfoort
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Elke Dierenarts
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Switzerland
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1,650 veterinarians working in Switzerland
C. 1,000 practices
C. 480 practices seeing small animals only
56% ♂ : 44% ♀ ( all practices)
46% ♂ : 54% ♀ ( small animal practices)
735 practices with a single principal
389 practices multiply owned
C.
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Switzerland
 Many think that Switzerland is some 10 years behind
Netherlands and 15 years behind UK in practice
development but...
 As in other countries, no willingness among recent graduates
to buy into practice
 No exit route for senior vets
 Many retiring with no prospect of sale
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Switzerland - corporates
 Two new corporates emerging:
 VETtrust – 1 new practice + 3-5 during 2010
 Fressnapf (pet store chain) + 2 vets – opening first branch in
2010
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Fressnapf
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What does all this mean?
 In the US and in the UK, the corporates have largely set
out the standards for employment terms and conditions
for veterinary employees
 JV partnerships provide an inexpensive way for young
vets to buy into a profitable practice structure
 Consolidators provide an exit route for some senior vets
 Consumer pressure means that the corporate approach is
here to stay
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Does corporate practice work?
Contribution (BITDA)
Ğ a practical definition of profitability
(before inter est, tax,depr eciation and am or tiz ation)
Private Practice
(typical) %
AÔ
corporate Õ
consolidator %
100.0
100.0
100.0
29.9
20.2
24.6
Vet costs
23.6
20.2
Support staff
19.0
15.7
47.5
42.6
35.9
16.8
16.9
16.6
94.2
79.7
77.1
5.8
20.3
22.9
Revenue
Drugs/supplies
*
Total staff (inc owner)
Estab & overheads
Total
Contribution (BITDA)
*
Companion Care
(average) %
Vets in Business Limited
Slide courtesy of Vets in Business
Tartan Business Solutions