The Competitions and Markets Authority has recently announced that it plans to undertake an investigation into the veterinary sector. The CMA have advised that they have a concern that consumers are being faced with a lack of transparent information necessary to making informed choices in the marketplace.
There are varying reports on the value of the veterinary sector to the UK economy, however, it is apparent that it is far from insignificant. In Scotland alone a figure of £700m for 2018 has been calculated, which, if the UK trend can be applied, will likely now be considerably higher.
One imagines that a significant catalyst for the CMA’s decision to investigate the sector is their expressed concern at the number of independent practices which have been brought under the wing of the veterinary corporate groups over recent years. The CMA notes that, while in 2013 independent practices accounted for 89% of the UK veterinary industry, this figure had fallen by 2021 to 45%. This is a valid point, although our experience is that the growth of value in practices has reduced the scope for exit for existing vet principals other than through sale to a corporate.
This point was at the centre of a recent CMA investigation into a proposed purchase of Quality Pet Care Ltd by the CVS Group. CVS Group has over 500 veterinary surgeries throughout the UK, ROI, and the Netherlands, with the bulk being in the UK. The proposed deal was to acquire 8 practices in England; this was found to raise competition concerns in 5 smaller local areas. This bears out the experience of the Thorntons Veterinary Team which is that the CMA are prepared to analyse competition on a relatively small scale within local communities.
Following investigation, the CMA determined that the deal would be detrimental to competition in the areas identified. CVS, thereafter, was required to propose legally binding solutions to address these concerns; these included divesting themselves of certain parts of the acquisition and ensuring that management was not brought under the CVS umbrella in the interim. Under the Enterprise Act 2002 the CMA has wide authority to require that either entire transactions be unwound or that certain parts of transactions be subjected to continuing scrutiny. Whether justified or not, the fact that the CMA can prevent practice sales is something which all principals looking to retire have to take into account.
A CMA investigation into the vet sector could have lasting implications, and the possibility of this was borne out in the markets, where, upon the announcement of the investigation, shares in both CVS and Pets at home fell 30% and 10% respectively. The reports can be wide-ranging and make recommendations not only for legislative but on government policy. The CMA uses merger control, market investigations (such as this) and competition law enforcement powers to ensure competitive market outcomes.
Taking inference from previous reports produced by the CMA it seems that a particular focus will be upon how far local price variation is being driven by a perceived lack of competition. In addition, views are being sought on the pricing of services and whether this pricing is clear and up-front to the public, the selling of prescriptions and medication, the transparency with which surgeries advertise and make clear whether they are part of a larger chain, and the uptake and use of limited out-of-hours and emergency care.
While the pending review leaves some level of uncertainty as to the direction of merger regulation for veterinary practices in the UK, the case of CVS and the renewed focus on the sector highlights the necessity of informed and timely advice. Thorntons Veterinary Team have a broad range of experience in the veterinary sector and with addressing the CMA’s increasing role in practice sales and acquisitions. We can provide specialist tailored advice in all aspects of the sale or acquisition of practices, and would be happy to hear from anyone in need of advice on this area.
