The Corporate Squeeze: How Corporate Consolidation is Disenfranchising Associate Veterinarians and Fueling Startups

Dec 31, 2019 at 1:29 pm
Anthony Mahan, Esq., MBA

In case you have been hiding under a rock the last few years, corporate consolidators have thrown piles of cash at acquiring veterinary practices throughout the U.S., which has resulted in lucrative practice purchases at astonishing valuation multiples. The corporate feeding frenzy is directed at multi-doctor practices with large client bases, healthy financials, geographic locations in greater metropolitan areas, and owners with short-term retirement goals (hereinafter the “Key Practices”). The general consensus is that these Key Practices constitute 50% of all independently owned practices. While the corporate feast can be a highly lucrative retirement plan for practice owners, there are some corresponding effects on the practice of medicine itself and especially the associates that once had a hope of being owners.

Can associate veterinarians compete with corporations and buy existing practices?

By and large the corporate practice of veterinary medicine hinges on price elasticity—the economic theory that offering lower prices to the public will result in increased sales. If you don’t believe me, just look at the razor-thin margins online pharmacies are willing to take to increase sales and deplete in-house pharmacies. In order to thrive in an elastic race-to-the-lowest-price market you need two key components:

  1. A fungible good or service
  2. A huge volume of transactions

Therein lies the issue. Quality veterinary services are not fungible, they are relationship-based. The key to keeping a client and patient for a lifetime is to have a client-patient-veterinarian relationship centered on the patient’s health. But if you have a rotating door of associate veterinarians who begrudge the corporate practice of medicine then the service does become fungible, and the focus on client compliance becomes more about marketing than communication.  Associate vets are becoming “disenfranchised” in part because of a keen focus on quality of life, and in part because of how corporate consolidations have reshaped their future.

Our office dubbed the term “disenfranchised associate” as someone who is not only a high producer, but also focuses on better medicine (increased diagnostics, specialty referrals, lower stress handling, behavioral, food trials, etc.), strong client/patient relationships, freedom of practice, quality of life (less hours, nights, weekends, emergencies, etc.), and has a goal to own, but finds themselves in pale comparison to corporate purchase prices. In the past, these associates could negotiate buy-ins or purchase transactions from 70% to 100% of the gross revenues of even a Key Practice with a plethora of banks waiting to finance the deal. However, these Key Practices are now selling well in excess of 100% of gross, with multiples exceeding 6-10x EBITDA (earnings before interest, taxes, depreciation, and amortization), and veterinary-specific lenders are having to explain that the deals are not financeable to the associate at those multiples. To add insult to injury, the increased demand for non-Key Practices drives prices up across the board, such that single-doctor practices and rural practices often top the scales of bank lending limits and a positive cash flow analysis. This now means that the associate who spent years developing relationships with his or her clients and patients has a dwindling view of ownership and may find working for the corporate consolidator that helped facilitate the landscape distasteful. So comes the rise of startups.

Should associate veterinarians start new practices?

As the price for independent practices rises, the growth rate needed for a startup to be a competitive investment falls. For example, an associate considering a startup practice or buying an average, single-doctor practice that once sold for 70% of its gross revenues would need an average annual growth rate of 28.5% over the first 10 years to have a competitive investment. [1] However, when the purchase price rises to 100% of gross revenues, that required average annual growth rate for a competitive startup drops to 24.5%. Furthermore, startups have added opportunities of a cheaper upfront investment, a new buildout and new equipment, easy access to financing, low barriers to entry, large availability of resources and assistance, and the ability to build your own culture and differentiation. While annual grown rates over 20% might seem daunting for an established practice, the average startup practice we work with regularly sees average annual growth rates well in excess of 25% during the first 10 years (my personal practice is over 40%).

This isn’t to say that startups don’t come with their own challenges of minimizing your cash burn rate when slow (perhaps providing relief work to offset the lack of cashflow), maintaining quality employees when cash is tight, and, of course, being able to grow your business in a competitive market. And if you didn’t glean from above, trying to compete on a pricing basis alone would be a fool’s errand.

How independent startups can compete with corporations

The future of independent veterinary practices is with relationships. Veterinary services by themselves are nothing more than a fungible, regulated set of services, so much that some corporate practices can boil them down to a checklist to follow. Yet it is the delivery of these services that creates differentiation in the market. The corporate practice of medicine focuses on price (cheaper) and availability (weekends, late hours, telemedicine, etc.) to gain market share—an area which you likely cannot compete if you want to maintain your sanity. But, independent practices can compete in the new marketplace by:

  • Focusing on building and maintaining relationships with clients and patients
  • Creating value by personalizing your services and making your clients and patients feel welcome
  • Standing out by opening doors, hiring friendly staff, being clean, feeding treats, championing Fear Free and low stress, personalizing follow ups, being on time, taking and sharing pictures, and engaging in the client’s personal story (it’ll be the best advertising dollars you’ve ever spent)

Good relationships build trust and longevity, and they offer the best competitive edge to the corporate practice of medicine.


[1] Assumptions: 1 DVM; Average Practice; 10 years; Gross $600k/year; Growth Rate 8.6%; Total Owner Compensation 17.4%; Loan at 4.5%/10 years ; AAHA Pulsepoints 9th.


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Anthony A. Mahan, Esq., MBA, CVA is the managing attorney at Mahan Law (, a national, veterinary-specific law firm focused on practice acquisitions, legal counseling, litigation, and startups. Tony also holds a certified veterinary analyst (CVA) designation to provide practice valuations. He is the current co-chair of the VetPartners Valuation Council and the secretary of VetPartners. In 2013, Tony and his wife, Dr. Jennifer Mahan, opened Riverview Animal Hospital, a successful multi-doctor practice located just outside of Cincinnati, Ohio.

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