Does my equity still hold value?

With the recent shift in the consolidation market, I started receiving calls from former clients regarding the value of their equity. Equity is defined as the value that would be returned to a company’s shareholders, once debts have been settled, and a merger or acquisition takes place. In the veterinary sector this usually occurs every three to five years. Typical returns for investors are four to six times their investment, depending on the company’s size, and how well the group has managed their existing hospitals. To be acquired, a company must focus on sound business principles. These include developing a strong operations team, purchasing hospitals at a reasonable price, growing the bottom line, having the ability to recruit, and being strategic on the location of their acquisitions.

Knowing whether your corporate partner has practiced these fundamentals is difficult to predict. The frenzy we have seen the past few years pushed multiples to un-sustainable levels. In recent months the market has reset, and groups are being forced to be selective on the hospitals they purchase. As more of the major players look to be acquired, their ability at recapitalization will be a strong indicator of their current business practices. The groups need access to capital, to grow, and the volatility of the debt market has made that difficult this year. As we head into 2023, we will continue to monitor the situation and provide feedback as it becomes available. Whether you view the last few years as good or bad, I’m confident in the resiliency of the veterinary sector, and have no doubt it will continue to pivot when faced with adversity.

For additional questions about the state of the market, please contact your local TPSG representative. Happy Holidays from our team to you!

Nick Elliston, Managing Partner
Great Plains/Mountain Region