UK acquisition opportunities still to be had, says CVS chief

Increased intervention from the Competition and Markets Authority (CMA) will not stop one of the world’s biggest corporate vet groups pursuing further UK acquisitions.

That was the message from CVS’ chief operating officer Ben Jacklin following a financial report showing significant increases in both revenue and pre-tax profits for the Norfolk-based firm.

Rising profits

The company posted its interim results last week, which showed a 7.5 per cent growth in like-for-like sales, a rise in pre-tax profits of 22 per cent and an increase in revenues to £269.3 million in the final six months of last year.

During the same period, CVS completed five practice acquisitions, which took its total number of practice purchases to eight for the year to date at a total cost of £35.3 million.

But there is growing speculation that the unchecked consolidation of the UK market may be coming to an end following a series of CMA investigations that have forced the big vet corps to row back on several deals during the past 18 months.

This includes CVS, which had to unwind its £20.4 million acquisition of Quality Pet Care last year after the regulator raised “serious competition concerns”.

VetPartners, Medivet and, most recently, IVC have all been subject to CMA investigations, but Mr Jacklin remains confident there are still UK deals to be done in 2023.

Clear guidelines

Mr Jacklin said: “The CMA process with Quality Pet Care was unhelpful, but at the same time, it has given us a very clear set of guidelines by which the CMA consider competition to be or not be an issue.

“We are engaging with the CMA when we have deals that are at any risk of presenting a local competition issue, and we are really happy that by engaging with them, we get clarity over what acquisitions we can or can’t do.

“There are significant numbers of acquisitions still to be made in the UK; there are great quality practices that will be able to join our group.

“So, for us, we still see a very long and healthy pipeline of acquisitions in the UK.”

‘Crazy multiples’

However, Mr Jacklin added that – unlike some of its competitors – CVS will not continue to pay “crazy multiples” to secure new acquisitions, either in the UK or overseas.

He said: “When there are good opportunities, we will explore them, such as opportunities we are exploring in the Netherlands and in other countries to further grow the group.

“But I am not so sure the days of crazy multiples are over in the market; we are certainly aware of some very high multiples being paid for practices in Europe. We have heard that some of those deals are going through at more than 20 times EBITDA [earnings before interest, taxes, depreciation and amortisation] by some of our other private equity competitors.”

Mr Jacklin also confirmed CVS’ plans to continue growing the referral side of its business.

Expansion

Since 2015, the company has opened Lumbry Park in Hampshire and Manchester Vet Specialists – both on greenfield sites – and has invested £10 million in its new Bristol Vet Specialists referral centre, which is due to open in April this year.

Mr Jacklin added: “We think there are other opportunities to expand and I think, in due course, there will definitely be the opportunity to do more of those, as there are parts of the country like Yorkshire, the north-east and Scotland that we don’t cover from a referral point of view.

“We certainly have the ambition to grow our referral division and I would say that is most likely to happen for us through greenfield investment rather than acquisitions at this point.”

Reward

CVS has also been growing its clinical teams and has added five per cent more vets to the payroll during 2022, a statistic Mr Jacklin believes reflects the success of the business’s bid to become the sector’s “employer of choice”.

He said: “Our approach over the past four or five years has really been to go through everything we do, from the colleagues we employ in leadership roles to the systems we use, to the way we reward people.

“We have a vision and that is to be the company people most want to work for, and for me, if you achieve that in the veterinary profession, you will achieve success in every other measure.

“So, everything we have done has been through that lens over the past couple of years. We have done specific things like being the first group to enhance maternity leave, as well as tactical improvements, including a range of new benefits for our colleagues.

“Those are all really important, but far more important is developing a culture where people come first.”