In September the CMA is due to publish a draft action plan for making the market for veterinary services work better. The cost of taking a pet to the vet soared by two-thirds between 2016 and 2023, it has found, nearly double the rate of other consumer services. Clinical advances and new medicines don’t satisfactorily explain the increase, it believes. 

More to the point, perhaps, is that while a decade ago 90 per cent of vet practices were run by local owner-practitioners, now a whopping 60 per cent belong to six large groups. One of them, Swedish-British-owned IVC Evidensia, is the second largest vet services provider in the world.

Yet the most important thing isn’t that vets have gone corporate. It’s that three of the large organisations, including IVC, are owned by private equity (PE). When prices suddenly soar, look for the incentives. In PE these are extreme, and they operate at every level, from the professional treating your sick cat or dog, to, most sharply, PE general partners sitting behind their desks in New York or Mayfair who have never been anywhere near the dispensaries or rural treatment practices that their funds own.

Let’s be clear. PE has zero interest per se in pet – or human – health or welfare, nor that of the communities they serve. What it does care about is industries or sectors that share certain characteristics. They have guaranteed demand, an assured income stream, and are small in scale – qualities that make them particularly susceptible to PE’s blunt instruments of consolidation or ‘rollup’, leverage and debt financing. So yes, PE loves vet practices, funeral services, human care homes and dental surgeries  – with the love felt by killer whales for seals and penguins or crocodiles for small deer or wild pigs. What pets, elderly relatives and people with toothache have in common, and what makes PE lick its chops, is that, in today’s merciless Trumpo-Muskian economic world, they are suckers who deserve to be exploited: as customers they are captive and unprotected, as industries small-scale and charmingly unsophisticated, and as employees and patients unorganised and isolated.

The small scale and local nature are important. First, they allow serial buyers to claim modernisation and scale efficiencies while they are actually laying the foundations for local monopoly, enabling them to raise prices, restrict choice and change payment methods – peddling insurance or subscriptions to smooth revenues, for example. Most acquired vet practices craftily retain their existing identities, so pet owners aren’t aware that they are now dealing with big corporates, while the scarcity of published price lists means that they are often also in the dark on that score. 

Thus does neighbourhood little vet quietly morph into corporate Big Vet. But that’s not all. Hidden in the acquisition process is a potent financial turbocharger in the shape of the dull-sounding ‘multiple arbitrage’. Larger organisations attract relatively higher valuations than smaller ones – they’ll be worth a multiple of say eight to 10 times earnings, rather than three or four. This means that as it grows, the budding cartel grows faster, sometimes dramatically faster, in value than in size. Coupled with leverage, high levels of debt and asset sales – the new owner may charge the acquisition a dividend for the privilege of being taken over; if the latter owns its premises, they may be sold and then leased back – this will work magic for the ‘carry’ of the general partners sitting on top of the fund when it is wound up and the proceeds distributed seven or more years later.

PE titans justify their outsize returns by pointing to gains in economic efficiency procured by their elimination of waste and improvment of firms’ operations. In the 1970s and 1980s this may even have been partly true. But the larger truth is that with the extraordinary growth of the sector, all but a very few of the easily improvable firms have already been done over, while the end of zero interest rates has revealed in all its glory the degree to which PE has depended on the magic of financial engineering and leverage for its returns; now that it really matters, the boasts of bringing operational management expertise to bear are shown to be largely hot air.   

The rollup strategy now being practised for vets, dentists, funeral services and others gave PE a new canvas to paint on: monopoly by stealth, achieved by flying under the radar and focusing on cottage industries rather than large, visible concerns. Once accounting and administration have been centralised and other costs cut to the bone, including professional personnel where possible, the next step is to move into related services – emergencies, diagnostics, pharmacies, insurance, burials – that can be similarly rolled up and billed separately. Anecdotal evidence suggests that as they are brought into the corporate fold, frontline vets too, to their discomfort, are coming under increasing pressure to meet sales and financial targets. One big corporate owner of vet practices is food group Mars (Whiskas, Pedigree, Sheba) – guess why. Any competition between them seems focused on edging prices up, rather than down.

The CMA’s action plan will likely require improved customer information, urge pet-owners to shop around , discourage the abandonment of basic (ie cheap) treatments, and possibly regulate to prevent further ownership concentration in some localities. What it will find harder to do much about is PE’s fundamental indifference to the industries it ‘invests’ in. This means that if push comes to shove – if pet owners, who go to prodigious lengths to pay for their animals’ care, can finally no longer afford to pay up and rates of ‘economic euthanesia’ rise too high – it will simply sell on its companies or flog the assets and move on to another trade to pillage. As one PE-owned US media company coolly announced as it auctioned off its last run-down websites last year, ‘we are working towards a full wind down [from which] we will exit having increased shareholder value.’ Closing down an insufficiently profitable practice or charging an eight-times mark-up on drugs for pets — it all ends up as fuel for the greed of some existing or would-be private equity billionaire.

The CMA goes out of its way to exempt vets themselves, praised for their continuing commitment to care and high professional standards, from criticism. But the financial and accounting margins within which they work are much more tightly drawn than in the past. When some years ago our aged cat had to be put to sleep, the vet, something of a celebrity who ran a practice in a posh part of central London, quietly told us he’d contact us later to settle up. He never did. Have no doubt that in the age of PE-driven Big Vet, such a human gesture not only wouldn’t happen – it might be a sackable offence.