Corporate veterinary practice in the UK, the Netherlands and Switzerland
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UEVP – November 2009 www.tartanuk.com Corporate veterinary practice in the UK, the Netherlands and Switzerland
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Corporate veterinary practice in the UK, the Netherlands and Switzerland. UEVP – November 2009. 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. - PowerPoint PPT Presentation
Transcript of Corporate veterinary practice in the UK, the Netherlands and Switzerland
UEVP – November 2009
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Corporate veterinary practice in the UK, the Netherlands and
Switzerland
What is corporate practice?
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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
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1. consolidators2. joint venture partnerships3. large, independent groups
U.S. VETERINARY PRACTICES
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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 totalSource Vet Economics
US - history
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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
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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
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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
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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
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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
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consolidators
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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
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Consolidators – CVS – 164 branches
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• 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
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Consolidators Pet Doctors – 35 branches
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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
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Joint-venture partnerships
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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
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• 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
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• 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
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JV partnerships – Vets4Pets – 45 branches
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• 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
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JV partnerships – Companion Care - 54 branches
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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
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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
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JV Partnerships – Medivet – 65 branches
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• 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
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large, independent groups
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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
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Goddard Veterinary Group – 34 branches
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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
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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
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Figures drawn from In Practijk – a leading veterinary journal in The Netherlands
Netherlands
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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
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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
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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
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Pet Wellness Center-Amersfoort
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Elke Dierenarts
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Switzerland
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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
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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
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Two new corporates emerging:
VETtrust – 1 new practice + 3-5 during 2010
Fressnapf (pet store chain) + 2 vets – opening first branch in 2010
Fressnapf
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What does all this mean?
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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) %
