Veterinary consolidator CVS expands further in Australia

UK company snaps up 13 practices, eyes at least 10 more

Published: March 20, 2024

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Britain's CVS Group has acquired more than a dozen veterinary clinics in Australia, including one in the Sydney beachside suburb of Cronulla.

Corporate consolidator CVS Group is rapidly growing its presence in Australia in a further sign that ownership concentration in that country's veterinary profession is moving toward the higher levels already seen in the United Kingdom and United States.

The English company, which owns around 500 practices, mostly in the U.K., first entered Australia in July, when it acquired four general practices there with a combined six practice sites.

By the end of December, it had grown its presence Down Under to 13 practices at 15 sites in cities such as Sydney, Melbourne, Brisbane and Canberra, all acquired for a combined A$103.8 million (US$67.8 million), the company said while releasing its mid-year profit results.

CVS said it expects to acquire another "10-plus" practices in Australia by June 30 — which is the end of its financial year — and indicated more acquisitions could follow.

"Over the last year, our belief that Australia is a fantastic market for us has only strengthened," Dr. Ben Jacklin, CVS's deputy CEO, said in a presentation to investors.

CVS (which has no relation to the U.S. drug-store chain CVS Pharmacy) is expanding on the other side of the world as it encounters some resistance to its growth plans at home. The U.K.'s antitrust regulator, the Competition and Markets Authority (CMA), last week deepened a probe into the industry amid a spike in the cost of veterinary care.

The CMA already has blocked several takeover deals proposed by CVS and other consolidators amid concerns they have amassed an anticompetitive position in some geographic locations in the U.K. The investment firm EQT, which owns British consolidator IVC Evidensia, also is looking to Australia for growth. In October, it acquired the country's largest corporate consolidator, VetPartners, from National Veterinary Associates.

Around 60% of veterinary practices in the U.K. are owned by six large consolidators, according to the CMA. In the United States, about 30% of general practices and 75% to 80% of specialty practices are owned by consolidators, together accounting for at least 50% of industrywide revenue, by the reckoning of Chicago-based Brakke Consulting.

Levels of ownership concentration in Australia are lower, though by how much is unclear. CVS estimates that Australia's two major consolidators, VetPartners and Greencross, collectively own about 11% of the market there. However, when including smaller consolidators, the CEO of VetPartners told the VIN News Service in June 2022 that they owned about 20% of all practices in Australia at the time.

Relatively low levels of consolidation, combined with a reasonably large market size of around 3,500 practices, "provides a long runway" of acquisition opportunities in Australia, CVS's Jacklin told investors.

He said the company hopes to save money — and thereby improve its profits — by taking advantage of its larger size when acquiring goods and services. In January, for instance, it committed to using a single wholesale supplier for all of its Australian practices.

"The Australian market has similar characteristics to the U.K. with an increasing pet population post the Covid-19 pandemic, humanisation of pets and consumers willing to invest in veterinary care for their animals," CVS said in its earnings release. "There is a history of U.K. and Australian vets spending time working in the two markets, and the approach to clinical care is similar."

The company's continuing international growth is coming even as a pandemic pet boom fades and higher interest rates increase the cost of borrowing to fund acquisitions.

In Australia, a more challenging environment for acquisitions appeared evident in November, when EBOS, a distributor of human and animal health-care products, backed out of a proposed acquisition of Greencross.

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