Corporate Veterinary Buyouts: Should Practice Owners Fear Them?
When you think of M&M’s, what’s the first thing that comes to mind?
I bet you said chocolate.
(Or the little round, yellow guy with feet and arms).
I personally think of a chocolate lab, or any other domestic animal that is a regular patient at your local veterinarian clinic.
Why do I think of a pet, you wonder?
Because in January of 2017, Mars Inc., the makers of M&M candies, Snickers, and other tasty treats, recently acquired 779 veterinary practices located throughout the country.
The clinics assimilated in the $7.7 billion dollar acquisition are animal hospitals and diagnostic laboratories formerly owned by VCA, Inc., or the Veterinary Centers of America.
That’s a lot of animal hospitals and a lot of cash.
For the record, Mars has a pet care unit whose pet food brands include the likes of Whiskas and Pedigree. And, if you’ve ever walked into a PetSmart, you also saw a division of that unit with the Banfield Pet Hospitals that are in some PetSmart retail locations.
Also, to be noted, corporate buyouts like the VCA acquisition are forcing veterinary associates to think twice about private ownership. The uncertainty of acquiring a “Dr. James Herriot diamond in the rough” practice is very real, pushing any dreams of being the only gig in town right out the window.
So, what does this kind of corporate veterinary buyout mean for a private practice ownership?
Let’s dive into details of this kind of acquisition, and how it might affect you and your professional future.
The Upside of Corporate Veterinary Buyout
It’s no secret that corporate buyouts can put fear into the small business owner. Because of this, a privately owned veterinary clinic in Smalltown, USA, may decide to fold his or her operation into the corporate entity before it even has a chance to make itself stand out.
And it does have a chance to stand out.
For starters, when corporate ownership rolls into town, it’s the perfect opportunity for private practices to shine. These looming buyouts force smaller clinics to lead more effectively while bringing greater structure to their business. This renewed sense of leadership can create:
- Tighter, more effective teams.
- Camaraderie and compassion among fellow practice owners.
- Updated, evidence-based medicine and standardized protocols within the veterinary practice.
While consolidated practices (like the Mars buyout of VCA) tout more competitive and financial advantages during acquisition, some might argue that much of the “human” side of the practice is lost. This is where private practices can up the ante.
This can be achieved by animal hospitals increasing their social media presence with personal stories or solving problems with heartfelt solutions. Also, creating a more personal relationship with clients (with follow up phone calls or addressing pet owners by name) can be the difference between a full, happy practice, and a defeated, declining one.
On the flip side, a corporate buyout may be just what the doctor ordered for practice owners getting ready for retirement. With corporations paying premium prices, it can prove to be a practical exit strategy for aging animal hospital owners. They retire with cash in hand, and their clinic continues to run and keep the majority of their team employed.
Having said that, buyouts don’t always keep team members and other veterinarians working.
The Downside of Corporate Veterinary Buyouts
With corporate veterinary buyouts come a series of changes with staff, policies, and procedures.
Sometimes downsizing is inevitable so that corporations can find better ways to buy supplies and manage staff. This is done to improve practice management issues and advance the efficiency of the clinic.
Of course, those laid off may not think so.
And while those who are let go struggle to find employment among a growing number of fresh, veterinary graduates, massive corporate buyouts present an ironic twist as they broaden their geographical reach and scope of services.
Those services (in some areas) can include 24-hour emergency care, cancer treatment centers, and specialized physical therapy. With these additions come increased veterinary client fees, too.
One final consideration in a corporate veterinary buyout is the possibility that the corporation will bring in different leadership and management skills. While this can prove positive as far continuing education and extended learning, it can also cripple or deteriorate long-time policies and procedures as set forth by the original owner.
In some full buyout scenarios, retiring doctors may have to continue working for a few years before they walk away for good. In these cases, they become the fall guy for employees to complain about all the changes the new corporation may have implemented. This can prove stressful for the entire team.
So, what happens then?
If the current team doesn’t accept new leadership skills, it can create a sense of animosity for all those involved.
Change is inevitable, we know that, and while corporate veterinary buyouts may not be the most favored option in the industry today, the shift isn’t all that bad.
Some advantages of corporate buyouts include a lower overhead and more purchasing power. This means that your local veterinarian may now carry medications that it couldn’t afford to stock before.
It also means less expensive in-house blood work, updated ultrasound machines, and state of the art CT or MRI machines for your favorite pup or kitty. With all of these medical needs and tools in place, veterinarians can focus more on their patients, and less on the practice management issues.
For practice owners less interested in giving away their animal hospital completely, there is a model that allows corporate groups to hold the majority of the interest.
Bob Sarsfield, a DVM in Pennsylvania, tells DVM360 Magazine that he sold 80 percent of his practice to Veterinary Practice Partners, also of Pennsylvania.
Still holding 20 percent ownership, Dr. Sarsfield is able to really focus on the medical aspects of the practice. The buying entity manages all the business aspects. In this model, the veterinary clinic doesn’t change, the name of the clinic doesn’t change, and the staff stays in place.
When it comes time for Dr. Sarsfield to retire, he has an exit strategy in place that will afford him a bit of windfall as Veterinary Practice Partners continues to run the clinic and take care of his long-time furry patients.
In the end, it all comes down to preference and professionalism.
For many long-time practice owners, they believe corporate buyouts are inevitable, and that weighing the pros and cons of corporate versus private purchase is a never-ending process that doesn’t actually offer a solution.
If the price is right, the relationship integrous, and the end result favorable, practice owners should look, instead, at the future of ownership and the state of veterinary care as a whole.
David McCormick of Simmons Veterinary Practice Sales & Appraisals notes that many veterinary owners incorrectly assume that financially stable practices can only be sold to corporate entities because fresh graduates have accumulated too much debt and, therefore, can’t afford to buy.
McCormick argues that solo practices continue to thrive and are, in fact, still the most common form of buyout.
Now armed with all of this information, one question remains:
How will you move forward with your future in veterinary medicine?
Will you purchase your own practice?
Or hold back to see how corporate America moves in?
America’s pets want to know…