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Mercenaries and Missionaries

Consolidators who push profits first leave veterinary teams feeling neglected, leading to less-than-optimal pet care and reduced profits.

Mercenaries and Missionaries
For better or worse, much of the veterinary profession will be consolidated.

Consolidation, a normal part of the economy, has come to our profession. Consolidation tends to occur in any successful, fragmented, profitable, healthy industry that will benefit from investment and continued growth. Recent human health care examples include growth investments in urgent care, hospice and medical devices.

I’ve had the good fortune to work in both independent and corporate environments. Currently, the majority of my efforts are in corporate veterinary consolidation. I’ve concluded that our profession has two distinct types of consolidators: mercenaries and missionaries. The majority are mercenaries.

Before I dive into the two groups, it’s important to note that a movement is underway in the world of big business. The Business Roundtable, a group of 200 CEOs of major U.S. corporations, issued a statement declaring a new corporate purpose. The old idea of a corporation functioning first and foremost to serve shareholders and maximize profit is being replaced by a new and more enlightened notion: that corporates better function to serve stakeholders, not shareholders. It’s an important distinction. Stakeholders include employees, customers, vendors, communities and the planet.

Purpose and profit are not opposite sides of the same coin. A recent Korn Ferry study found that purpose-driven consumer-product firms grew sales at an average annual rate that was 6.5% higher than their peers. This move to stakeholders over shareholders is playing out in the world of veterinary practice consolidation. Veterinary consolidators that I include in the missionary category are looking out first for stakeholders — purpose first, and then profits result. But I digress.

Mercenaries: The Head

Mercenaries have a simple investment thesis. They see a fragmented, unregulated, recession/pandemic-resistant, thriving veterinary niche. It’s a place where they can briefly put their money and earn high returns at little risk. Pet numbers are up, pet spending is up, pet lifespans are up, the humanization of pets continues, and aging practice owners are looking for the exit. This all adds up to an attractive investment thesis and makes perfect financial sense.

These investors could just as well buy doughnut shops, gas stations, hardware stores or anything else that offers the potential of good returns. Our profession is a good investment. It’s all about the numbers (the head). It has little to do with the heart. A short-term investment, typically three to five years, yielding maximum profit at little risk — I understand. No heart necessary. Strictly business. Mercenaries connect with the head.

Missionaries: The Heart

Missionaries, on the other hand, better understand the heart of the profession. They are committed to veterinary professionals, pets, families and society. Missionaries take a multiyear perspective. They understand both the profession’s head and heart. The missionary groups include committed veterinary professionals in their ranks. I once heard us described as native speakers. The outside mercenary investors have had to learn veterinary medicine as a second language. Missionaries speak the language.

As with many things, missionaries and mercenaries often fall along a continuum, some leaning more one way than the other.

If we were to look at the veterinary consolidation cycle like a baseball game, it would look something like this:

Early Innings: The Land Grab

The early innings are when investors buy as many properties as they can as fast as they can. The objective is to buy individual hospitals at a price of 1X and then bundle and sell a group of practices at 2X (arbitrage). In the land-grab phase, investors have a limited horizon. They seek to roll up hospitals and then flip them in a few years.

Mercenary groups have a proven financial model. When considering a hospital purchase, they look primarily at revenue and EBIDTA, a fancy measure of profitability. These “flip and forget” mercenaries have dominated the veterinary landscape.

Thankfully, our profession is nearing the end of the land-grab phase. The good news during a land grab is that sellers (practice owners) receive record prices. The not-so-good news is that the land-grab mercenaries are unlikely to invest back in their purchased practices. They look to sell for as much as possible as fast as possible. A simple formula.

Middle Innings: Bigger Fish

After the land grab come the middle innings. This is when the next round of investors buys groups of practices from the short-term mercenaries. These are typically bigger fish looking to buy littler fish. They will pay more for a group of practices, as risk is reduced across a broader portfolio of hospitals.

Middle-innings investors generally take a longer view and are more willing to invest back in the hospitals with things like recruiting, retention, back-office support, equipment, people and training. They are better for our profession than early-innings investors. Our profession is moving into the middle innings of the consolidation cycle.

Final Innings: The Whales

Ultimately, only a few strategic consolidators are left standing in the final innings. They are big fish. In fact, they’re whales. (Yes, I know whales are not fish.) The whales buy out the bigger fish and are in it for the long haul.

Just five big players are left in the United Kingdom. Consolidation is not as far along in the United States. Two really big U.S. strategic players have emerged: Mars Inc. (Banfield, VCA, Pet Partners, BluePearl, Antech, Linnaeus and AniCura) and JAB Ltd. (Compassion-First and National Veterinary Associates). Both have made substantial investments in our space and are here to stay.

The whales hopefully will prove to be more missionary than mercenary. Sadly, that’s not always the case.

The Shareholder Model

Now, having completely mashed up baseball and fishing analogies, let’s further contrast the shareholder and stakeholder model. I like to think of our profession as a three-legged stool: people, pets and profits. All three legs are critical for a practice to succeed. The mercenaries prioritize the profit leg, which makes sense given their financial thesis and short time frame. Most investors prioritize profits first, pets (consumers) second and people (veterinary teams) third. Those who push profits (not a dirty word) first can leave veterinary teams feeling neglected, which results in less-than-optimal pet care and, ironically, reduced profits.

The Stakeholder Model

My employer, WellHaven Pet Health, and other missionaries strongly believe in the stakeholder philosophy. The priority is always people (hospital teams), and then come pets and pet owners. Profits are a consequence. Hospital teams are my customer, so if they are happy, then pets and pet owners will receive great care, in which case profits are a natural outcome. The well-being of veterinarians and their teams, the autonomy to practice good medicine, and the opportunity to grow personally and professionally are critical to success in the stakeholder model.

We Are the Experts

Consolidation is a reality in our profession. For better or worse (mostly better in my view), much of our profession will be consolidated. Shame on consolidators who fail to place veterinary professionals (those who understand the head and heart) in strategic positions. Shame on veterinary professionals who are not standing up and demonstrating their leadership abilities to consolidators. Veterinary professionals are badly needed in C-suites and on consolidators’ boards of directors to help guide decision-making and a long-term, sustainable view.

Further, perhaps idealistically, as bigger consolidators begin to roll up smaller consolidators, missionaries will prove that the most successful consolidation models keep people first. Missionaries know that profits will follow. In that way, late-inning whale investors will see that they can maximize their returns by understanding our profession, taking a long-term view, employing native speakers and putting people first. Veterinary professionals get this intuitively with their heart and head.

The missionary model is the winning model.

Creative Disruption columnist Dr. Bob Lester is the chief medical officer at WellHaven Pet Health, a former practice owner and a founding member of Banfield Pet Hospital and the Lincoln Memorial University College of Veterinary Medicine. He serves on the boards of Pet Peace of Mind, WellHaven Pet Health and the Lincoln Memorial veterinary college. He is vice president of the North American Veterinary Community.


Here are key features of mercenaries and missionaries in the world of veterinary practice consolidation.

  • Mercenaries: Short timeline, loyal to shareholders, a compliance culture, a top-down hierarchy, a command-and-control leadership style, feels like a factory, rarely invests in people, the facililty, the community, equipment and technology.
  • Missionaries: Long timeline, loyal to stakeholders, a commitment culture, a bottom-up hierarchy, a servant leadership style, feels like family, invests in people, the facililty, the community, equipment and technology.