Veterinary business under the effect of unbridled concentration

The veterinary sector interests investors

If private equity is present in many sectors of activity, it is perhaps more surprising to find it in the news of veterinary clinics. This market has been progressively liberalized, to the point that when veterinarians have initiated a reflection on the valuation, development and transfer of their activity, turning to new partners (and therefore new capital) has become more democratic.

Particularly attractive, the sector is growing steadily... Especially since with 15.1 million cats and 7.5 million dogs, 1 out of 2 French households has a pet! And let's not forget the agricultural world with a livestock of 18 million cattle, more than a million goats, a million horses and a little less than a million pigs. This represents the main part of the veterinary activity for a total market estimated at 3 billion euros in France.

The veterinary clinic sector, which has been fragmented until now, is now undergoing an accelerated process of concentration, driven by a dozen or so groups, as was the case with the analysis laboratories. On June 8, ARDIAN, one of the world's leading private equity firms, announced a new financing package to support SEVETYS in the acquisition of 100 additional veterinary clinics in France.

Based in Paris, SEVETYS is one of the main operators of veterinary clinics in France with already about 180 establishments. All indicators seem to show that this trend is not likely to be reversed in the years to come, or even reinforced.

The EBITDA margin targeted for each establishment by the groups would be around 20%, to reach a consolidated level of around 15% (after deduction of head office costs). The development of turnover has really become a daily concern, as in any private company. Care and medication represent the bulk of earnings, but ancillary products such as kibbles and other by-products are becoming increasingly important, accounting for up to 15% of the business in certain brands, most of which have dedicated departments in their stores.

At the same time, an insurance market has of course developed with players such as AGRIA, which claims to be^{the leading} European insurer for pets. Banks and classic insurers such as AG2R, CRÉDIT MUTUEL, GAN, MATMUT, APRIL or even AXA, GROUPAMA offer their guarantees... Or even CARREFOUR BANQUE ET ASSURANCE (non exhaustive list).

The ongoing concentration is a major challenge for French breeders

Long associated with general medicine, the notion of "medical desert" is beginning to be applied to the veterinary profession. Like doctors, young veterinary graduates are less inclined to practice in rural areas and prefer to settle in cities where working conditions and hours are less restrictive.

Indeed, the conditions of practice in rural areas are more difficult because of the work (often outdoors and therefore subject to bad weather), the hours spent on the road and the wide range of hours related to emergencies and on-call duty. This problem of on-call duty is not only rural, since the same recruitment difficulties are found in urban practices.

This problem is above all a social phenomenon. Like many professionals, everyone's expectations have evolved. The time devoted to the family has become a priority and is sometimes non-negotiable with employers. Not to mention the difficulty for a spouse "who follows" to find a job in areas that are sometimes economically less dynamic.

With the increase in the size of clinics, mainly linked to canine activity (including in the countryside), a specialization of veterinarians has gradually developed. The management of on-call duty, with the lengthening of time slots, is a problem; the temptation to stop the activity sometimes enters the mind... Not to mention that the profitability of certain acts associated with travel in rural areas, sometimes exceeding 100 kilometers, can be pointed out...

Indeed, with the large groups, the issue no longer seems to be a coherent and efficient networking of the rural territory, but clearly a question of profitability. When a cost accounting is carried out, coupled with the difficulty of recruiting rural practitioners, decisions can be taken to put an end to interventions on cattle and sheep, and thus to privilege pets: less dangerous for the intervention, less kilometers (the client often brings the dog or cat to the clinic), better profitability of X-rays and other scans, operations and additional care often charged at a high price, without forgetting, as already mentioned, the food or other derivatives

Will farmers have to be trained more in the minimum intervention procedures for their herds and accept a loss rate that is much higher than the one currently recorded? Knowing that, in suckling herds, the rate of calf losses varies greatly between farms, but can fluctuate within the same farm from one year to the next. A mortality rate of less than 7% between birth and weaning is considered acceptable, but beyond 10%, this ratio becomes high and can jeopardize the whole farm... Especially if the phenomenon persists from one year to the next. It should be noted that calving and lambing remain among the main factors causing calf and lamb losses.

According to figures from the 2020 agricultural census, metropolitan France has lost about 100,000 farms in ten years, reaching a 31% loss for livestock alone.

Shouldn't a young farmer who wants to go into animal husbandry reconsider his project if he cannot count on a veterinarian geographically close to his farm? Especially since the current trend towards concentration in the veterinary sector seems irreversible. It is unlikely that clinics that are now part of groups will become independent again.

Disintegration of the rural network and loss of resilience in the event of disengagement of the veterinary activity

If departments such as Creuse are still globally spared, compared to Allier, Yonne or Côte d'Or, this situation is nevertheless a source of concern and a real issue for the future of livestock farming in France.