By Marvin Stenersen (Stockholm School of Economics)
Photo: Ayla Verschueren (Unsplash)
Introduction
During the pandemic, many around the world acquired pets to make the time in lockdown less dreadful and this has led to an increase in demand for pet food, services and also veterinarians. It is against the backdrop of this strong trend that CVC Capital Partners has acquired Medivet, a leading UK-based veterinary firm. They acquired them in September for a sum of more than £1B. The deal was reached in an auction process run by HSBC on the bequest of Inflexion Private Equity in April 2021 who had been a part-owner of Medivet since 2016.
Overview of Medivet (Target)
Medivet operates over 300 branches and more than 20-round-the-clock clinics across the UK and is one of the largest veterinary groups in the UK. They have recently expanded into Europe in Germany and Spain in which they in total have 50 sites in operation.
Medivet offers services including magnetic resonance imaging (MRI), x-rays, ultrasound, endoscopy and gastropexy, it also provides emergency care, preventative healthcare and pet insurance services enabling owners to let their pets have access to the most sophisticated healthcare treatments available. A service offering that together with “outstanding business practices” according to CVC has led Medivet to be a very attractive target.
Overview of CVC Capital Partners (Acquirer)
CVC Capital Partners is a world leader with over $125B in assets under management. They have significant experience growing companies and helping them expand, in addition to the healthcare team has significant experience in the industry with their leading MD has been a practising veterinarian himself. Their strategy often relies on growing the firms they take over and leveraging their global network to provide them with a competitive advantage
Synergies
In the wake of the pandemic, there has been a significant interest for takeovers of firms set to gain in the “Pandemic Pet Boom”. This comes on top of significant developments in the industry previously as the market has become increasingly consolidated by actors, for example, the EQT backed IVC Evidensia who at the beginning of 2021 took in more capital to continue expanding by acquiring private veterinary practices across the UK and Europe.
For CVC then the motivations behind the purchase are twofold, first, the opportunity to with Medivet continue consolidating what remains a fragmented veterinary market, and second the opportunity to capture the potential of the ongoing expansion into the European markets and to increase it with their support.
With CVC’s funding, Medivet will then, according to CVC’s press release, pursue a strategy focused on driving both organic and inorganic growth, while further enhancing Medivet's established reputation for exceptional care and service to its clients. CVC aims to leverage their strong UK presence and international reach to support Medivets growth in both the UK and abroad and work to ensure they remain a leading provider of veterinary services in the growing animal health and wellness sector.
Risks and Uncertainties
One concern is the long-lasting effect of the pandemic pet boom and what the developments of pet ownership and veterinary demand is going forward beyond the pandemic into the future. However, the demand for veterinary services and the consolidation of the market were in place before the pandemic and has instead only been intensified by it and it looks likely that CVC will be able to realize their growth ambitions with Medivet going forward.
Still, there is always the risk from competitors working to the same, such as IVC Evidensia and while the market remains fragmented now, in 5 years time the competitive landscape might be rather different, even if the integration of individually acquired veterinaries into the larger Medivets and IVCs make take some time.
The transaction is expected to close formally in Q4 2021 as it is subject to regulatory approvals, however, no apparent issues are present.
Summary
The Pandemic has come with many effects but the “Pet Boom” and the growing amount of transactions that has followed is one of the most interesting. While it remains to be seen what synergies will be reaped by Medivet going forward from leveraging the additional funds and expertise from CVC, and how the competition will look into the future as the market becomes more concentrated, it is certain that this is set to be one of the trends to follow as we emerge out of the pandemic