Attending industry events like Veterinary Meeting & Expo (VMX) provides veterinary practice owners with invaluable insights. After participating in this year’s VMX, we gathered key observations that can significantly impact your decision-making process regarding the sale of your practice. Let’s dive deeper into the main takeaways:
- Strong Buyer Interest for 2023: One of the standout trends we observed at VMX was the significant buyer interest in veterinary practices. Many buyers, including corporate groups and independent investors, are actively seeking new acquisitions. Interestingly, buyers were particularly enthusiastic about utilizing their funds within the first half of 2024. The aggressive push to close deals during this time indicates that the market remains robust for sellers, despite economic fluctuations. However, buyers are becoming more selective. Instead of a scattershot approach where they would look at any practice, they are now more strategic, focusing on practices that align with their long-term goals. This shift toward selectivity means practice owners should be prepared to showcase the strengths of their business, from location to revenue streams. If you’re considering selling, now is a great time to explore the market, as demand is strong but requires careful preparation to make your practice stand out.
- New Buyers Entering the Market: Beyond the established corporate buyers, we saw a notable increase in new buyers entering the space. What’s particularly interesting is the rise of groups led by former veterinarians. These buyers often bring a deeper understanding of the business’s operational challenges, which can make them attractive partners for sellers who are concerned about the legacy and culture of their practice. The influx of buyers with veterinary backgrounds suggests a growing trend toward a more compassionate and practice-friendly approach in acquisitions. This is great news for sellers who want to ensure the continued well-being of their staff and clients post-sale. Additionally, it highlights that veterinary practice owners now have a broader pool of potential buyers to consider, each with varying motivations and post-acquisition plans. New entrants to the buyer market add fresh dynamics, making it crucial for sellers to know their options and explore all potential buyers carefully.
- Increased Presence of Private Buyers: While corporate buyers continue to dominate the market, we observed an encouraging presence of private buyers at VMX. These individuals or smaller entities often provide a more personalized acquisition process compared to larger groups. Private buyers are typically local and may have a specific range they are looking to invest in, which could be beneficial for practices in certain geographic areas. One thing to note is that private buyers often have a different valuation range than corporate groups. Corporate buyers tend to offer higher valuations due to their ability to integrate practices into larger platforms, but private buyers might offer other benefits that align with your exit goals, such as maintaining the practice’s culture or offering flexible working conditions post-sale. For sellers interested in a more personal touch and potentially fewer drastic changes post-sale, considering private buyers may be a great option. However, the range of opportunities will be more geographically limited.
- Valuation Multiples Are Shifting: Valuation multiples for veterinary practices have fluctuated over the past year. In 2022, valuations were as high as 14x EBITDA (earnings before interest, taxes, depreciation, and amortization), but as of early 2023, the multiples have shifted to a range between 10x and 12x. The downward adjustment isn’t cause for concern but rather reflects the broader market trends and buyer expectations. Many experts at VMX suggested that this decline might continue, potentially reducing multiples even further by the end of 2024. Therefore, if financial return is a major motivation for selling your practice, this may be a critical window to act before the multiples decline further. It’s essential to evaluate your financials carefully, and if you’re planning on selling, now is the time to consult with experts and take action.
Why Now Could Be the Right Time to Sell
The veterinary practice market remains strong, and buyers are actively seeking new opportunities. However, given the evolving dynamics, sellers should be prepared, whether it’s in getting their financials in order, understanding buyer motivations, or knowing how to market their practice effectively. With potential changes in valuations and an increasingly selective buyer market, now is the time to consider your options and determine if selling in 2023 aligns with your financial and personal goals.
If you’re considering selling your veterinary practice, 360 Vet Sales is here to help guide you through the process, ensuring you get the best deal possible while keeping your long-term objectives in mind. Contact us today for a free consultation and market evaluation.