1. UEVP – November 2009 www.tartanuk.com Corporate veterinary practice in the UK, the Netherlands and Switzerland

2. What is corporate practice? www.tartanuk.com A corporate veterinary practice is one where the practice is owned and operated by a company rather than by an individual, or a group of individuals. In the UK, these are invariably limited companies This is widespread in other professions in the US and the UK; eg. opticians, dentists, pharmacists

3. Three different models www.tartanuk.com 1. consolidators 2. joint venture partnerships 3. large, independent groups

4. U.S. VETERINARY PRACTICES www.tartanuk.com Type of Practice. Large animal exclusive 1,134 Large animal predominant 1,219 Mixed animal 2,258 Small animal predominant 3,122 Small animal exclusive 17,011 Equine 1,323 unspecified 717 ------------------------------------ Total 27,123 US % corporate = c.6% of total Source Vet Economics

5. US - history www.tartanuk.com Corporate veterinary practice began in the US, in 1955, with Banfield which now has 750 clinics, employing more than 2,000 vets The US market is also shared by VCA (Veterinary Clinics of America) which has 470 clinics, employs c. 1,800 vets and also owns Antech Diagnostics

6. UK - history www.tartanuk.com UK corporate practice began in 1999 when the RCVS relaxed its rules on practice ownership to allow non-vets to own practices. Two initial consolidators began the process: CVS and VPI. VPI collapsed and was absorbed into CVS in 2006 CVS is now, by far, the biggest of the corporate groups

7. Corporate practice in the UK www.tartanuk.com Approx 3,700 practices in UK, seeing small animals.* Approx 400 practices considered to be ‘corporate’ in ownership Approx 11% practices are ‘corporate’ By 2020, I would envisage that around 20% will be ‘corporate’ at the current rate of conversion/senior retirement allowing for a drop in overall numbers * Source – Vetfile October 2009

8. 3 different styles of ‘corporate’ practice www.tartanuk.com UK examples Consolidators – CVS Ltd – Pet Doctors Joint venture partnerships – Vets4Pets – Companion Care (CC) – +/- Medivet Large groups with organic growth – Goddard Veterinary Group

9. UK Corporate groups www.tartanuk.com CVS Ltd. (164 +1) Medivet (65 branches +1) Companion Care (54 branches +1) Vets4Pets (45 branches +1) Pet Doctors (35 branches [ was 37] +1) Goddard Veterinary Group (34 branches+1) UK % corporate practices =11%

10. consolidators www.tartanuk.com

11. consolidators www.tartanuk.com Practice group growth by acquisition sometimes single practices sometimes whole groups In the UK, recent graduates are largely unwilling to buy into partnership In the UK, the consolidators have been seen as the primary exit route for principals/partners wishing to sell

12. CVS www.tartanuk.com

13. Consolidators – CVS – 164 branches www.tartanuk.com CVS Ltd - Sovereign Capital – only group with national coverage in the UK Floated on AIM in 2007 Still acquiring practices – scale now working against the central admin office Questions about real-time profitability buried behind escalating borrowing MD/FD work-out period ending 2009 Market expects divestment when new board takes over Owns three laboratories and equine referral hospital Some unrest amongst practice staff will cause internal problems while externally, CVS moves from strength to strength

14. Pet Doctors www.tartanuk.com

15. Consolidators Pet Doctors – 35 branches www.tartanuk.com Pet Doctors started in 1999 Two directors: Garret Turley, David Grant Diversified to purchase Wey Referrals + Greendales laboratory Smaller practices, 2 man rather than 3-4+ Location: clusters in Surrey, Sussex, Hants, Essex

16. joint venture partnerships www.tartanuk.com

17. Joint-venture partnerships www.tartanuk.com As the name suggests, the veterinarians enter into a joint venture with the holding company providing the infra- structure and some/most of the investment capital

18. JV Partnerships www.tartanuk.com Vets4Pets and Companion Care both share the same financial model ( ex SpecSavers opticians) Holding company forms umbrella over several ‘stand alone’ limited businesses Min investment for 2 partners, (vet+ vet, vet + nurse) £30k = 10% ‘A’ shares JV partners + holding company share the balance of the ‘A’ shares, holding company retains all the ‘B’ shares. Over 5 yrs, JV partners expected to have bought all ‘A’ shares and profit share is then payable At £30k investment, partners earn £35k pa + dividends where payable. Most successful (Companion Care) JV partners currently earn £200,000+ pa

19. JV Partnerships www.tartanuk.com Holding company provides all necessary services: financial + investment, financial reporting, administrative, legal, HR, recruitment, property, training, advertising & marketing Fee payable for these services - 15% t/o Holding company negotiates discounts from suppliers – may be shared with practices No diversification into referral or laboratories

20. vets4pets www.tartanuk.com

21. JV partnerships – Vets4Pets – 45 branches www.tartanuk.com Vets4Pets shares are now 100% owned by managing director Messy divorce from other partners Slower start but has accelerated recently Industry belief that delays were due to planning difficulties Location: predominantly N of England and N Ireland New strategy of acquisition through sister company, Autumn 2009

22. Companion Care www.tartanuk.com

23. JV partnerships – Companion Care - 54 branches www.tartanuk.com Companion Care is a division of Pets at Home (PaH), owned by Bridgepoint. Bridgepoint had planned to sell PaH in 2008/9 but performance too strong so will retain. CC could be spun off. CC’s ambition is to acquire Vets4Pets business as part of expansion plan.

24. JV Partnerships - Companion Care www.tartanuk.com Of the 54 CC surgeries, 50 are sited in Pets at Home stores so, currently, this may be more difficult to arrange in market. Jane Balmain (MD) provides very strong leadership and it is widely held that she is the main reason for CC success to date If Vets4pets could be acquired, this would give Companion Care c. 100 practices and national distribution Location: England (mostly S)

25. Medivet –the veterinary partnership www.tartanuk.com

26. JV Partnerships – Medivet – 65 branches www.tartanuk.com Medivet started with South African investment. Five South African partners Has a reputation for aggressive marketing and high prices* Large no of certificate holders ensures that most referral is carried out in-house No laboratory Location: London, SE and Essex Converted from consolidation model to a form of JV partnership in 2007 Has recently nationally price-matched certain procedures to generate more volume to take up slack capacity

27. large, independent groups www.tartanuk.com

28. large, independent groups www.tartanuk.com These may not, technically, be recognised as corporates but are run as corporates Good examples would be: Goddard Veterinary Group Best Friends group Vets Now (very different model, providing out-of-hours cover) + others

29. Goddard Veterinary Group www.tartanuk.com

30. Goddard Veterinary Group – 34 branches www.tartanuk.com Current owner/ director is Philip Goddard MRCVS Head office based in Wanstead, attached to original veterinary hospital Family business started by Philip’s father Privately owned, although registered as a Limited Company possibly for tax reasons Also owns Stone Lion Referrals in Wimbledon ( another of the hospital bases), and an in-house laboratory Offers night service from Wimbledon, to other local practices

31. Large groups with organic growth www.tartanuk.com Goddard Veterinary Group Three clusters of satellite surgeries, each surrounding a veterinary hospital in Wanstead (18), Northolt (8) and Wimbledon (8) Significant economies of scale with expensive equipment needed for just three out of 34 surgeries + staff economies with undemanding rotas - valuable in attracting staff

32. Netherlands www.tartanuk.com Figures drawn from In Practijk – a leading veterinary journal in The Netherlands

33. Netherlands www.tartanuk.com C. 3,200 vets working in practice C. 1,300 veterinary practices C. 900 practices seeing small animals C. 700 practices are owned by a single principal > 425 practices are multiply owned 49% ♂ : 51% ♀ ( owners still predominantly ♂) Practices becoming bigger, through mergers, and have more satellite branches

34. Netherlands www.tartanuk.com Average # FT vets/practice = 5.0 ( 2.4 in 1998) With recent graduates (more female vets), there is less appetite to own a practice Within 10 years, many male principals will wish to retire and some practice sales to ‘corporates’ have taken place Not every practice is interesting for acquisition and many vets fear that they will have to close the business without succession

35. Netherlands - corporates www.tartanuk.com Over the last four years, three ‘corporates’ have developed: Dierendokters – 7 clinics Pet Wellness Center - 1 in 2009, 6 more in 2010 Elke Dierenarts - 4 clinics

36. Dierendokters - Amsterdam www.tartanuk.com

37. Pet Wellness Center-Amersfoort www.tartanuk.com

38. Elke Dierenarts www.tartanuk.com

39. Switzerland www.tartanuk.com C. 1,650 veterinarians working in Switzerland C. 1,000 practices C. 480 practices seeing small animals only 56% ♂ : 44% ♀ ( all practices) 46% ♂ : 54% ♀ ( small animal practices) 735 practices with a single principal 389 practices multiply owned

40. Switzerland www.tartanuk.com Many think that Switzerland is some 10 years behind Netherlands and 15 years behind UK in practice development but... As in other countries, no willingness among recent graduates to buy into practice No exit route for senior vets Many retiring with no prospect of sale

41. Switzerland - corporates www.tartanuk.com Two new corporates emerging: VETtrust – 1 new practice + 3-5 during 2010 Fressnapf (pet store chain) + 2 vets – opening first branch in 2010

42. Fressnapf www.tartanuk.com

43. What does all this mean? www.tartanuk.com In the US and in the UK, the corporates have largely set out the standards for employment terms and conditions for veterinary employees JV partnerships provide an inexpensive way for young vets to buy into a profitable practice structure Consolidators provide an exit route for some senior vets Consumer pressure means that the corporate approach is here to stay

44. Does corporate practice work? Tartan Business Solutions Slide courtesy of Vets in Business