Throw “your local pet vet” onto Google and you’ll get a few options. A vet clinic in Hillcrest, Hamilton, which “can boast its origins back as far as the 1960s”. A Manurewa, Auckland practice “serving the community for over 40 years”; Taradale Vet Hospital “established in Napier” also for that magical 40-plus years, The Gardens Veterinary Clinic practising in Dunedin for over 30 years.
Many of these local pet veterinary companies are branded ‘Pet Doctors’, a grouping of NZ veterinary practices built up from the 2000s.
But what their pet owner customers may not know is these vet practices, plus a couple of hundred others in New Zealand and Australia, all trace their ownership – via different vehicles in Australia and California – to Germany.
That’s where the Reimann family, one of the wealthiest families in the world, comes from. Four family members head a vast (more than US$50 billion) private equity network headquartered (almost certainly for tax reasons) in neighbouring Luxembourg.
Private equity (as opposed to public equity, which is people putting their money into ‘public’ companies via the stock market, for example) involves investors buying and selling private companies.
The Reimann investment company is called JAB. It owns a variety of consumer brands – Krispy Kreme doughnuts, Dr Pepper drinks, Bally shoes, Coty cosmetics, the British sandwich shop chain Pret a Manger, and Espresso House, the largest coffeehouse business in the Nordic countries.
It also owns pet businesses – insurance companies and vets.
JAB bought Californian veterinary group NVA in 2019. NVA owns VetPartners, the biggest vet company in Australia, and through that holding, JAB is the proprietor of about 50 New Zealand vet practices, including the Pet Doctors vets.
Why would some of the richest people on the planet be interested in small vet clinics on the other side of the world?
A profitable business model
It’s about consolidation. A big corporate group can buy up a bunch of vet practices, close or merge the less profitable ones, integrate finance and HR teams for the group, and organise joint purchasing deals for all those flea treatments, petfood and medical supplies a vet needs.
Suddenly you’ve got a nice business model.
And the vet business is seen as relatively recession-proof. You might not get a fancy clip for Fido when times are tough, but you probably aren’t going to let him languish, sick, on the couch either.
Covid was a boom time for the pet sector. Unable to travel, people got themselves a new ‘companion animal’. Instead of paying for flights and meals out, they splurged at the pet store and the vet practice.
There’s another trend too: as Fifi and Fluffy become increasingly part of people’s families – rather than their pest control or farm management team – so their broken bones are more likely to get set, their cancers be operated on, and their diabetes treated with twice-daily injections.
PetPartners’ Sydney-based communications manager Jemma Kelly told Newsroom the company operates 270 clinics across Australia, New Zealand and Singapore, including nearly 50 clinics in New Zealand. That’s down a bit from the 55 the company owned in 2020.
“We remain positive about the growth prospects in the region and continue to invest in the business through people, facilities, equipment and learning opportunities,” Kelly says.
“We still have quite a way to go until we exhaust the pull of really good community practices that want to join a model like ours,” then PetPartners CEO John Burns told the Veterinary Information Network in 2020.
In the US, roughly a quarter of general veterinary practices in the US are owned by corporate consolidators, up from about five percent just 10 years ago. That’s according to the Freakonomics podcast, which did a two-part series on the issue earlier in the year.
“When it comes to specialty veterinary practices — emergency care, surgery, cancer, things like that — corporate ownership is around 75 percent,” the first part of the podcast, entitled ‘Should you trust private equity to take care of your dog?’, said.
“A super interesting part of the veterinary profession is it’s very much a local business, very much a small business.”
Greg Hartmann, CEO private equity vet owner NVA
Why are those specialty vet practices so attractive to private-equity firms, presenter Stephen Dubner asked? And the answer: specialty practices yield higher revenues and they’re growing much faster than general vet care.
The same corporatisation trend is happening in the UK. A Financial Times article from 2021 talked about a single private equity-backed company, IVC Evidensia, owning up to 20 percent of vet practices in the UK; in some parts of the country IVC owns more than 50 percent.
IVC’s owners include: Stockholm headquartered EQT, the third-largest private equity firm in the world; American global private equity company Silver Lake; and listed food giant Nestlé, which started moving into petfoods in the 1990s.
The vast Mars corporation, a privately held company best known for Snickers and Skittles but which also makes pet food, is another major purchaser of vet practices worldwide.
Keeping it ‘local’ – from Luxembourg
A billionaire German family may own your local vet practice, but they won’t be shouting it from the rooftops. Historically, vets have tended to be small, locally owned businesses, and the big guns reckon customers like to think it’s still that way.
“People like to take their dog to the local vets and not feel like it’s a corporate machine,” one adviser close to IVC told the Financial Times.
Same message from Greg Hartmann, chief executive of National Veterinary Associates, the Californian company that owns PetPartners in Australia, and is owned by JAB in Luxembourg. “I think it’s a super interesting part of the veterinary profession, which is it’s very much a local business, very much a small business,” he told Freakonomics.
“There’s so much trust and goodwill between pet owners and their local veterinarian that it’s important people who are investing the space, in my opinion, understand that to infringe on that trust would be the wrong direction to take the profession.
“Instead of seeing this as an opportunity to replace a small business with a big business, instead it’s an opportunity to create a larger business that ultimately protects, preserves, and enhances these small businesses that we’ve partnered with.”
New Zealand’s overseas private equity-owned clinics also push that local feel, as Newsroom found.
Pet Doctors Hillcrest, part of the JAB private equity stable, promotes itself as “one of the very first vet clinics opened in Hamilton. Even though it has had varied premises over the years, it is now firmly established as your friendly neighbourhood animal hospital,” the website says.
“It should be transparent. It’s hard for the average pet owner to discern the difference. It’s not a name change, they don’t advertise as corporate-owned. They come in and change nothing except the structure of the business, which clients can’t see.”
Megan Alderson, The Strand Vet, Auckland
Jemma Kelly at PetPartners says its New Zealand vet clinics “are managed and led by local team members, and supported by an NZ-based management team of well-respected people from across the veterinary industry.
“Our ‘Join Us. Stay You. Support You. Grow You’ philosophy enables clinics and their team members, culture and heritage to continue to thrive. We are committed to preserving the long-term viability of community-based veterinary practices in Australia and New Zealand.”
Does it matter?
So what if your “local” vet practice is owned by global private equity? As long as animals and their owners are getting good treatment from skilled practitioners, most customers likely wouldn’t have a problem.
Yes and no, says Dr Megan Alderson, who co-owns and runs The Strand Vet in Parnell, Auckland. “It should be transparent,” she says. “It’s hard for the average pet owner to discern the difference. It’s not a name change, they don’t advertise as corporate-owned. They come in and change nothing except the structure of the business, which clients can’t see.”
Maybe you want a coffee. If you choose Starbucks, you know what you are buying into. If you choose the café up the road, you are maybe wanting to support a local business.
But with vets, “it doesn’t feel transparent”, she says.
I tell Alderson about my own experience with my local vet, which is closed for the next couple of weeks “due to severe personnel shortages in the veterinary industry”. An email told me “in the meantime, our clients are warmly invited to attend Auckland Pet Hospital for regular and emergency appointments – only 6 minutes away!”
When I check it out, both practices are in the JAB stable.
“I don’t have staff shortages,” Alderson says. “Our values are about looking after our work community. That doesn’t happen in the same way with the corporates.”
Do I mind that my local vet is part of a global corporate? Probably not. The vet and the nurses are great. But I like being able to walk up to the practice, and with the shutdown this month I wonder whether when the present vet retires, will he be replaced? Maybe not.
Closures and monopolies
Overseas, corporatisation is causing bigger problems, according to the Financial Times and Freakonomics. There have been complaints about communities being left in the lurch when a newly acquired practice closes, and of service levels dropping.
One shocking story featured a farmer in Ireland bringing a calf with a broken leg to Donegal Animal Hospital, only to be told it had been closed without warning that day after being taken over by IVC Evidensia. The farmer had to drive his calf to another practice, vets said. The incident, and other opposition, has led to the Irish lawmaker Jackie Cahill bringing forward a private members’ bill aiming to bar corporates from running veterinary practices.
The rapid change in the vet market has also caught the attention of regulators.
The US Federal Trade Commission ordered JAB to sell 11 of its vet practices after two acquisitions created a potential monopoly problem. “Serial acquisitions can be used by private-equity firms and other corporations to roll up sectors, enabling them to accrue market power and reduce incentives to compete, potentially leading to increased prices and degraded quality,” FTC chair Lina Khan said.
Meanwhile, the UK’s Competition and Markets Authority investigated the UK’s CVS Group after it bought Quality Pet Care. The CMA concluded “a substantial lessening of competition” could result from an acquisition where the resulting share of full-time equivalent veterinary surgeons in the relevant catchment area is above 30 percent.
CVS has expanded into Ireland and the Netherlands and is looking elsewhere in Europe. Alderson says she has heard the company is “just about to hit NZ’s shores”. Newsroom has contacted CVS for confirmation.
Alderson hasn’t heard of bad stuff happening in New Zealand after practices being taken over by big overseas groups.
In fact, she knows of a couple of times where vet practices have been closed down after a corporate acquisition, and that’s left space for an entrepreneurial independent vet to come and set up shop.
At the same time, having big groups offering big money for smallish practices has provided – and continues to provide – a welcome exit strategy for local vets at the end of their careers.
Still, that ‘local’ marketing strategy used by the big players rankles. It’s pushed a group of vets, including Alderson, to set up IndieVets NZ, a collective of local owner-operator vets promoting themselves as such to potential customers, and providing other support, including collective buying power and help with staffing and training.
The IndieVets site has set up a list of members – about 80 at the moment – and some frequently asked questions, the first being “Does it matter who owns my local vet clinic?”
The answer: “That’s totally for you to decide. We believe there is something special about a veterinary clinic where the vet(s) that own the clinic, work in the clinic. And supporting a New Zealand-owned veterinary business means the money you spend is invested back into the local clinic, and the New Zealand economy.”
Dr Steve Merchant is the founder and director of IndieVets, and a vet who’s been on both sides of the fence. He began his career as a solo vet, but then built up the Pet Doctors group. Merchant took on a private equity partner (“albeit one of the ‘nicer’ ones”, he says). After a few ownership changes, those vet clinics ultimately ended up in the JAB stable.
Pet Doctors was a brand that went right through the country, Merchant says, but most clinics de-branded when VetPartners bought them. “They didn’t want them to look like a group.”
Merchant says an owner-operator is the “life and soul” of their practice, and when they are bought by a corporate, that life and soul is lost. Independent vets can end up feeling a bit isolated, he says.
“I’m not anti-foreign ownership, but it seems the larger a group gets, the more it plays the local card and obscures the fact that it’s a corporate.
“We are trying to highlight that there is local and non-local ownership and to give vets who really are local a leg up in awareness. There are a whole load of people who want to spend money in their community and have a right to know.”
Having a public list of independent vets isn’t just good for the customers, but can help practitioners looking to buy into or sell a local practice. “Some people don’t want to sell to a group, they want to preserve their legacy. And we’d like to keep local vets in the community for another generation.”