This September, the Competition and Markets Authority (CMA) launched a review of how veterinary services are bought and sold in England and Wales.
The CMA has stated that the way veterinary practices are owned has changed dramatically over recent years. Independent practices accounted for 89 percent of the UK veterinary industry in 2013, whereas now they only account for 45 percent (2021). The significant increase in corporate presence in the veterinary sector has led the CMA to ensure that pet owners are getting value for money and are clear on the ownership of the practices they visit and where their pets receive treatment.
What can the CMA do?
The CMA has a number of powers and can take action against the companies they find have breached competition law. In extreme cases, they can force companies to divest business months after the original acquisition took place. This process is a formal, statutory procedure which can take time and will be costly for the company being forced to sell up. If such action is required, the companies must collaborate with the CMA, making sure the divestment action is compliant under competition laws.
In extreme cases, [the Competition and Markets Authority] can force companies to divest business months after the original acquisition took place
The CMA has taken an active interest in the acquisitions made by Independent Vetcare (IVC), VetPartners, CVS Group plc and Medivet.
Transactional impact
While there is still merger and acquisition activity in this sector, we have found that corporate deals are taking longer to complete, which could be a result of buyers being more cautious and seeking approval from the CMA before proceeding. As mentioned above, if the CMA issues an order following the completion of a transaction, the corporation will incur significant costs to divest the business. This makes little commercial sense if they have already incurred costs in acquiring the business.
Where competition clearance ahead of a transaction is key for a buyer, we commonly see that the relevant transaction documents are agreed upon and exchanged with the transaction not legally completed until the CMA has given its approval
Where competition clearance ahead of a transaction is key for a buyer, we commonly see that the relevant transaction documents are agreed upon and exchanged with the transaction not legally completed until the CMA has given its approval to the transaction. It is important that transaction documents provide a seller with as much certainty and control as possible while this process is ongoing. They should also adequately deal with the process if the CMA is unwilling to approve the transaction.
It is recommended that you seek advice from sector specialists – those who are experts on the transactional process and can advise on the most appropriate way to compile these documents.
If you are looking to sell your veterinary practice to a corporation or are going through a sale process, rest assured that there is still the appetite for these acquisitions. However, they may take longer to complete if CMA approval is required prior to the sale.
