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Private equity has plenty of black marks against its name. The collapse of Southern Cross healthcare left more than 30,000 elderly people high and dry.
Department store chain Debenhams vanished from the high street after failing to recover from the massive debts that a consortium of buyout firms had piled onto its balance sheet at the same time as extracting huge dividends.
And the AA roadside service has struggled for years under an enormous debt pile left over from its time in private equity hands. The list goes on and on.
But mercilessly squeezing people and their beloved pets is a new low even by the shoddy standards of Mayfair’s plumped-up princelings. So here comes Britain’s competition enforcer to save poor Fido from the clutches of ruthless financiers, who appear to have turned the veterinary services market – somewhat aptly perhaps – into a highly profitable cash cow in recent years.
The Competition and Markets Authority has announced it is launching a review into the UK’s £2bn veterinary sector amid concerns that anti-competitive practices are preventing pet owners from getting value for money. If the monthly bill for ensuring my two cats don’t get fleas is anything to go by then the industry is fully-deserving of some time under the microscope.
It wouldn’t be the first industry to face such accusations in recent months.
Possessed by a burst of fresh energy under steely new boss Sarah Cardell, and responding to mounting disquiet that consumers are being routinely ripped off under the cover of soaring inflation, the regulator is relentlessly chasing down any suggestions of profiteering.
In this year alone it has investigated petrol pricing and groceries in quick succession, and it is currently in the early stages of scrutinising the big consumer goods companies that produce many of the popular brands found on the supermarket shelves.
Cardell is determined – quite rightly – to focus on the big issues affecting families during one of the toughest periods for household budgets in living memory.
A former corporate lawyer, she is desperate to expel concerns that the watchdog has spent too much time and excessive resources in the past investigating more granular matters that risked looking somewhat inconsequential to the majority of consumers. Brexit has also allowed the CMA to become more assertive out of the shadow of Brussels’ monopolies police.
The cost of vet services certainly seems worthy of further examination, as witnessed by investor reaction to the news. Shares in Pets at Home, which operates a network of 450 vet services outlets, plunged 9pc to 343p, while the share price of deal-hungry veterinary chain CVS crashed by more than a third at one point to a near three-year low of less than £14.
The CMA says evidence points to the cost of care for pets soaring faster than inflation, which is putting further strain on households. The reason? Bigger chains, often with the financial might of private equity behind them, have been snapping up smaller practices with the ferocity of a rabid pit bull let loose in a bunny enclosure.
Ten years ago, almost 90pc of vets in the UK were independent. By 2021 that figure had shrunk dramatically to just 45pc, and more than half of the veterinary practices in Britain were owned by six companies, three of which were private equity-backed, according to the Royal College of Veterinary Surgeons. Two thirds belonged to a group of three or more, the same research found.
One outfit, IVC Evidensia, has been on a remarkable acquisition spree, scooping up more than 300 individual practices across Europe in the space of a single year with the backing of Swedish private equity giant EQT behind it.
In the UK, the firm has amassed a network of more than 1,000 practices – equivalent to roughly one in five or six as of 2021.
Medivet, which is owned by private equity houses CVC, August Equity, and LGT Partners, has more than 400 practices in the UK and ambitions to grow to 800. Previous owners Inflexion were derided for referring to vet practices as CGUs (cash-generating units).
It is corporatisation on steroids as what was once a cottage industry has been turned into a massive money-spinning enterprise with seemingly grim repercussions for pet owners and the animals themselves.
The speed with which the industry got in its excuses suggests that it, too, is fearful that the CMA will come down hard.
CVS claimed its pricing was a reflection of “a significant shortage of vets in the UK” together with wage rises and “other inflationary pressures”. Owners have also previously blamed advances in animal medicine and clients’ expectations.
No doubt there are plenty of mitigating factors but it’s hard to escape the sense that a reckoning is due.
The price of veterinary and other pet services, such as kennel boarding fees, rose by more than twice the rate of inflation between 2015 and 2020 – 17pc compared with 9pc inflation, according to the Office for National Statistics.
It wouldn’t be the slightest bit surprising if that discrepancy had widened amid the convenient fog of runaway inflation.
Pet owners have previously complained of four-figure vets’ bills for an overnight stay in a clinic and of a single MRI scan costing a scarcely-believable £2,500. These are huge sums even for wealthier families, but for a typical household they are positively eye-watering.
With the CMA keen to prove it has the bite to match its bark, opportunities don’t come much better.
Squeezing pet owners for cash is a new low for private equity
The rapid corporatisation of what was once a cottage industry warrants close regulatory scrutiny