The veterinary services market has experienced steady growth, driven by increasing pet ownership and heightened consumer spending on pet healthcare. The U.S. market is valued at approximately $11.9 billion in 2022 with a CAGR of 9.7% from 2023 to 2030.
According to the American Veterinary Medical Association, mean annual expenditures on veterinary visits increased from $224 in 2020 to $362 in 2022 for households with dogs and increased from $189 in 2020 and $321 in 2022 for households with cats. However, veterinary visits declined by 2% annually for 11 consecutive quarters from 2022 to 2024. This decline may be due to a 6.4% rise in veterinary costs in 2023, outpacing overall U.S. inflation and leading some owners to defer non-essential visits. The industry also faces a veterinarian shortage, with only 76% of projected demand expected to be met, increasing workloads of veterinarians and straining clinics.
Despite some of these concerns, the veterinary sector has attracted interest from private equity in recent years. Since 2017, total PE deal volume in the U.S. veterinary sector has surpassed $45 billion, with acquisition multiples ranging from 10-18x EBITDA. Private equity firms are drawn to veterinary clinics because of their recession-resilient nature, cash-based operations, and most importantly, their opportunities for consolidation due to the fragmented ownership landscape.
The buy-and-build strategy is the main strategy private equity firms use to approach the veterinary industry. Multiple clinics are acquired and integrated to form consolidated, larger entities to leverage synergies and increase market power. Several clinics have adopted this approach, reshaping the veterinary landscape.
VetCor, one of the most prominent veterinary consolidators, grew from 41 clinics in 2010 to over 850 across the United States and Canada today. Cressey & Company initially gained control over VetCor in 2010 and implemented a buy-and-build strategy to consolidate independent veterinary practices, many of which were owned by veterinarians nearing retirement. These smaller businesses could be acquired for a mid-single-digit EBITDA multiple versus a mid-teens multiple.
Under ownership, VetCor optimized operations by standardizing management, training, and administrative functions while allowing individual clinics to maintain their local identities. This balance between corporate efficiency and local autonomy made VetCor attractive for investors. The buy-and-build strategy proved successful as VetCor expanded under new investor interest from Harvest Partners, Oak Hill Capital, and TPG Capital.
From the seller’s perspective, the VetCor strategy allows these independent clinics to maintain operational autonomy while benefitting from shared resources and economies of scale. Veterinary clinic owners are further incentivized to sell their business to private equity firms because it provides them with liquidity.
Over the past decade, VetCor has achieved an annual EBITDA growth rate of 15% and VetCor continues to acquire two to three clinics each month.
Despite its success, consolidation in the veterinary sector presents challenges. As more investors enter the space, competition for acquisitions intensifies, driving up valuations and limiting the availability of attractive targets.
In December 2017, KKR acquired PetVet Care Centers (another reputable network of veterinary hospitals) from previous owners Ontario Teachers’ Pension Plan and L Catteron. At the time of acquisition, PetVet operated 125 globally branded hospitals across 22 states. KKR’s investment aimed to support PetVet’s growth strategy by focusing on acquiring and operating general practice and specialty veterinary hospitals to diversify its existing clinics. In October 2023, KKR secured a $2.3 billion private loan from a group of lenders led by Blue Owl Capital to recapitalize PetVet, aiming to pay off over $3 billion in outstanding debt set to mature throughout 2025. Under KKR’s ownership, PetVet has grown to operate over 450 clinics across the United States.
The National Veterinary Associates (NVA) has also expanded into multiple segments, operating over 1,400 veterinary hospitals and pet resorts across North America, Europe, and Australia. NVA was acquired by Summit Partners in 2007, then Ares Management in 2014, and finally JAB Holding Company in 2019 in a $5 billion deal. NVA generates more than $3.5 billion in annual revenue, with an estimated EBITDA of $650 million in 2023.
To supplement the buy-and-build strategy, competitors are leveraging pricing strategies to increase market share. Thrive Pet Healthcare has pursued a different strategy by focusing on affordability and subscription-based preventative care after backing from Morgan Stanley Capital Partners and later TSG Consumer Partners.
In 2022, Thrive rebranded and introduced Thrive Plus, a membership program offering free exams and discounted services that the company claims to save subscribers approximately $300 per year. By 2023, the program had more than 200,000 active members, generating over $120 million in recurring revenue. Thrive has also invested strongly in telemedicine and AI-driven diagnostics to enhance efficiency. In 2023, its revenue reached approximately $1.1 billion, with an estimated EBITDA of $180 million and a valuation of around $2.5 billion in 2022.
Overall, the buy-and-build method has offered a clear path to value generation at a time when the veterinary services industry is experiencing record-level deal multiples. GPs are currently under pressure to build asset value in ways that do not rely on traditional strategies like falling interest rates and stable GDP growth. That is, this strategy is appealing for GPs who see opportunities to build additional asset value in the veterinary sector through smaller add-ons that can be acquired for lower multiples. Ultimately, this brings down the average cost of acquisition through multiple arbitrage.
