National Veterinary Associates (NVA), the owner-operator of more than 1,500 freestanding veterinary hospitals and pet resorts in the U.S., announced this spring that it will form two separate businesses.
The new business, called Ethos Veterinary Health, will separately manage 145 specialty veterinary hospitals. Its portfolio will consist of legacy Ethos Veterinary Health, Compassion-First Pet Hospitals, Sage Veterinary Centers, and legacy NVA specialty and emergency hospitals.
The remainder of the general practice veterinary hospitals, pet resorts, and equine practices will be overseen by NVA, which is worth about $6 billion.
By forming the two businesses, Ethos and NVA can focus on their specific strategies and prepare initial public offerings of each unit in the next two to three years, according to the announcement. Ethos will focus on advancing cutting-edge medicine to extend and improve the lives of pets while NVA will continue to focus on ensuring access to care for all pet owners.
NVA was acquired in 2019 by the investment firm JAB Holding Co. (JAB), along with Compassion-First. NVA has tripled in size since then, according to a company news release. In 2021, JAB-backed NVA signed a $1.65 billion deal to acquire the parent company of Ethos in June 2022, just months after buying Sage for $1.1 billion.
As a condition of purchasing Ethos, the U.S. Federal Trade Commission (FTC) ordered JAB to divest clinics in Richmond, Virginia, Denver, San Francisco, and the Washington, D.C., area. The commission also imposed prior approval and prior notice requirements on both JAB and its divesture buyers for future acquisitions of specialty and emergency veterinary clinics.
More recently, in October 2022, the FTC finalized a consent order against JAB designed to prevent the private equity firm from further consolidating control over specialty and emergency veterinary clinics.
According to the complaint, this deal is part of a growing trend towards consolidation in the emergency and specialty veterinary services markets across the U.S. in recent years by large chains, including JAB.
John Volk, a senior consultant for Brakke Consulting, said, "The split of the company into general practices and specialty practices recognizes that the management demands for those categories of practices are quite different and allows them to focus resources appropriately. In the future, JAB would have the flexibility to take either public as a separate company or to take them public together under common ownership."
Brakke estimates 70% to 75% of specialty hospitals in the U.S. are already corporately owned, limiting growth by acquisition.
"This move also recognizes that practice consolidation is a mature industry, and corporate owners must rely more in the future on operational performance and less on acquiring individual practices," Volk said.
He added, "Size and scale do give large corporates the opportunity to test and innovate in ways that are more challenging for individual privately owned practices," Volk said. "Independent practices, however, can compete very effectively as respected owners of local businesses and members of the community. There is ample room for both in veterinary medicine."