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FTC's JAB order won't deter veterinary M&A

Jun 16, 2022
Illustration of a cat with an x-ray view of its stomach revealing a dollar sign.

Illustration: Brendan Lynch/Axios

The Federal Trade Commission earlier this week ordered JAB Investors-backed National Veterinary Associates to divest 16 veterinary clinics inherited via its $1.1 billion purchase of SAGE Veterinary Partners.

Why it matters: Although the FTC is seemingly keeping close tabs on what it deems anticompetitive private equity activity in health care, this order shouldn't prevent sales of large vet care platforms.

  • "This is not an indictment on consolidation of vet practices," one industry banker tell Axios. "This was completely expected."

Zoom in: The order, to which JAB consented, asks the industry giant to shed a handful of Texas and California specialty clinics (versus general practice hospitals) — which represent a small fraction of the overall vet field.

  • NVA via its acquisition of SAGE, and subsequently Ethos Veterinary Health at an even larger price tag, significantly boosted its specialty vet business. (SAGE and Ethos were the last two remaining independents of scale in specialty.)
  • Hence, the FTC doesn't want one player to dominate what is a much smaller market that includes 24-hour ER practices, or a doctor specializing in areas like neurology or cardiology.
  • "These specialty hospitals are very, very unique and rare," one source notes. "Most cities don't even have specialty."

Be smart: This looks a lot like a 2017 order by the FTC that required Mars to divest 12 vet clinics providing specialty and emergency services, in order to acquire VCA.

The bottom line: General practice vet platforms still have a long runway of M&A in what remains a fragmented market.

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