NOW Is The Best Market For Private Buyers To Purchase A Practice

THE BEST PRACTICE MARKET IN MANY YEARS OPENS TO PRIVATE BUYERS BECAUSE CORPORATE BUYERS ARE DECREASING OFFERS

The corporate veterinary practice sales market has been slowing since January 2022. Private buyers have a great opportunity to get in the market while the corporate buyer is backing off.

Private buyers can obtain great bank financing or private seller financing, even though the current financial market is in an inflation period. Rates remain low because veterinarians have such a low default rate.

Corporate buyers, with increased financing costs and increased opportunity costs, cause equity fund groups to be less aggressive in buying, which decreases the multiples and offers. This decreases the cash at closing and their determination to get to the closing day, which means corporate purchases are taking longer to close. With decreased cash at closing, the seller is expected to take more notes from buyers and many times the notes are contingent on the seller reaching a preset performance goal. If goals for sellers are not met, the sale price decreases. Corporate buyers are also making increased demands for seller employment time after the sale closes.

In the past, the seller’s post-closing employment was usually expected to be two to three years, with an occasional acceptance of one year. Now the corporate buyer expects sellers to work for at least three to five years, with five years being the preference. It is obvious that corporate buyers are feeling the veterinary associate shortage, like all practices.

With the veterinary associate shortage and the increased corporate buyer demand that sellers stay employed longer after a sale, many sellers are preferring private buyers that want to work in the practice to allow the seller a shorter transition period or at least some freedom to have more time off after closing.

The timing is right for private buyers, not only because the competing corporate buyer is decreasing demand and price, but because the veterinary service industry still has a very strong client demand, in most demographics. So, if there is a new owner with some new management styles, with more efficiency, a private buyer has the chance to make a prudent purchase and develop the practice.

Many Sellers are listing their practices and want to sell, partly because they are ready to slow down in their careers or retire. They can’t slow down at work with increased client demand and with the hardship of retaining associate doctors. The COVID pandemic increased pet ownership, causing increased demand for veterinary care and may have increased practice stress levels along with the increased demand to make more work for a practice short on doctors. These seller needs are opportunities for private buyers.

Private buyers should contact their veterinary practice broker to be included in the broker’s preferred buyer list for early notice about new listings. The early notice allows a buyer in many situations to find out about a new opportunity, even before the broker’s listing becomes public knowledge. This allows interested buyers the purchase opportunity before multiple buyers cause competition for a specific practice, in a specific location, that a buyer desires. There are some very profitable practices listed that are great opportunities for private buyers.

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