UEVP – November 2009 Corporate veterinary practice in the UK, the Netherlands and Switzerland.

UEVP – November 2009

www.tartanuk.com

Corporate veterinary practice in the UK, the Netherlands and

Switzerland

What is corporate practice?

www.tartanuk.com

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

Three different models

www.tartanuk.com

1. consolidators2. joint venture partnerships3. large, independent groups

U.S. VETERINARY PRACTICES

www.tartanuk.com

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

US - history

www.tartanuk.com

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

UK - history

www.tartanuk.com

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

Corporate practice in the UK

www.tartanuk.com

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

3 different styles of ‘corporate’ practice

www.tartanuk.com

UK examples

• Consolidators– CVS Ltd– Pet Doctors

• Joint venture partnerships– Vets4Pets– Companion Care (CC)– +/- Medivet

• Large groups with organic growth– Goddard Veterinary Group

UK Corporate groups

www.tartanuk.com

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%

consolidators

www.tartanuk.com

consolidators

www.tartanuk.com

Practice group growth by acquisitionsometimes single practicessometimes 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

CVS

www.tartanuk.com

Consolidators – CVS – 164 branches

www.tartanuk.com

• CVS Ltd - Sovereign Capital – only group with national coverage 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

Pet Doctors

www.tartanuk.com

Consolidators Pet Doctors – 35 branches

www.tartanuk.com

Pet Doctors started in 1999Two directors: Garret Turley, David GrantDiversified to purchase Wey Referrals +

Greendales laboratorySmaller practices, 2 man rather than 3-4+ Location: clusters in Surrey, Sussex, Hants,

Essex

joint venture partnerships

www.tartanuk.com

Joint-venture partnerships

www.tartanuk.com

As the name suggests, the veterinarians enter into a joint venture with the holding company providing the infra- structure and some/most of the investment capital

JV Partnerships

www.tartanuk.com

• Vets4Pets and Companion Care both share the same financial 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

JV Partnerships

www.tartanuk.com

• 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

vets4pets

www.tartanuk.com

JV partnerships – Vets4Pets – 45 branches

www.tartanuk.com

• 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

Companion Care

www.tartanuk.com

JV partnerships – Companion Care - 54 branches

www.tartanuk.com

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.

JV Partnerships - Companion Care

www.tartanuk.com

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)

Medivet –the veterinary partnership

www.tartanuk.com

JV Partnerships – Medivet – 65 branches

www.tartanuk.com

• 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

Has recently nationally price-matched certain procedures to generate more volume to take up slack capacity

large, independent groups

www.tartanuk.com

large, independent groups

www.tartanuk.com

These may not, technically, be recognised as corporates but are run as corporates

Good examples would be:Goddard Veterinary GroupBest Friends groupVets Now (very different model, providing

out-of-hours cover)+ others

Goddard Veterinary Group

www.tartanuk.com

Goddard Veterinary Group – 34 branches

www.tartanuk.com

Current owner/ director is Philip Goddard MRCVSHead office based in Wanstead, attached to

original veterinary hospitalFamily business started by Philip’s fatherPrivately owned, although registered as a

Limited Company possibly for tax reasonsAlso owns Stone Lion Referrals in Wimbledon ( another of the hospital bases), and an in-

house laboratoryOffers night service from Wimbledon, to other

local practices

Large groups with organic growth

www.tartanuk.com

Goddard Veterinary GroupThree 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

Netherlands

www.tartanuk.com

Figures drawn from In Practijk – a leading veterinary journal in The Netherlands

Netherlands

www.tartanuk.com

C. 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 49% ♂ : 51% ♀ ( owners still

predominantly ♂)Practices becoming bigger, through

mergers, and have more satellite branches

Netherlands

www.tartanuk.com

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

Netherlands - corporates

www.tartanuk.com

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

Dierendokters - Amsterdam

www.tartanuk.com

Pet Wellness Center-Amersfoort

www.tartanuk.com

Elke Dierenarts

www.tartanuk.com

Switzerland

www.tartanuk.com

C.1,650 veterinarians working in Switzerland C. 1,000 practices C. 480 practices seeing small animals only56% ♂ : 44% ♀ ( all practices)46% ♂ : 54% ♀ ( small animal practices)735 practices with a single principal389 practices multiply owned

Switzerland

www.tartanuk.com

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 vetsMany retiring with no prospect of sale

Switzerland - corporates

www.tartanuk.com

Two new corporates emerging:

VETtrust – 1 new practice + 3-5 during 2010

Fressnapf (pet store chain) + 2 vets – opening first branch in 2010

Fressnapf

www.tartanuk.com

What does all this mean?

www.tartanuk.com

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

Does corporate practice work?

Tartan Business Solutions

Slide courtesy of Vets in Business

Vets in Business Limited

Contribution (BITDA) Ğ a practical definition of profitability(before interest, tax, depreciation and amortization)

20.3

79.7

16.9

42.6

19.0

23.6

20.2

100.0

A ÔcorporateÕconsolidator %

22.95.8Contribution (BITDA)

77.194.2Total

16.616.8Estab & overheads *

35.947.5Total staff (inc owner) *

15.7Support staff

20.2Vet costs

24.629.9Drugs/supplies

100.0100.0Revenue

Companion Care(average) %

Private Practice

(typical) %