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Navigating Veterinary Hospital Sales in 2024

June 26, 2024

Veterinary Services Group

While 2021 and 2022 saw a surge of veterinary consolidators buying privately owned practices, the trend began to cool in 2023 and has continued to decline in 2024.

Aside from a decrease in the number of transactions, there has been a shift in acquisition terms specifically related to consideration. If you are interested in selling your practice, be sure to evaluate the following when assessing offers.

  • It is rare for transactions to use 100% cash proceeds. Instead, the purchase of the hospital is typically done via a mix of cash, retained equity (buyer securities), seller-subordinated notes tied to post-sale performance of the business, and other forms of consideration. Based on the current market, the mix of consideration is typically as follows:
    • 50-60% cash
    • 20-25% seller-subordinated notes
    • 20-25% buyer securities
  • Sellers are now being asked to sign longer-term employment contracts because consolidators have become increasingly aware that the success of the business they are buying is due to the successful doctors and owners of the practices. Consolidators are lengthening the seller’s employment contracts to three to five years to maintain profitability following the sale.
  • For owners who continue to own the hospital’s real estate, it is important to consider how the current economy has affected rent values. High interest rates impact the fair market value of real estate used to determine building lease terms. This, in turn, is driving down the value of potential rental income from the real estate activity.

This list represents only a few items that should be considered when evaluating the pros and cons of selling your practice. Please keep these in mind and contact KSM’s veterinary consulting team with questions or to discuss how we can specifically help your hospital.

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