By Rachael Green, Benzinga
With more Americans owning pets and those pet owners increasingly prioritizing the health and well-being of those new pets, the market is ripe for veterinary hospitals everywhere. So the closing of Inspire Veterinary Partners Inc.s (NASDAQ: IVP) Initial Public Offering (IPO) last month, marking the introduction of the first publicly traded vet services company is a great opportunity for investors who want to gain exposure to that $61 billion vet services market.
Inspire generated $6.4 million in gross proceeds from the IPO which will fund its ongoing growth strategy as it works on finalizing a series of new acquisition deals. The owner and operator of a growing network of acquired veterinary hospitals has set a goal of 10 new acquisitions per year over the next five years, giving investors plenty to look forward to with this new entry on the NASDAQ.
Vet Hospitals Are Poised For Growth As Pet Owners Take Greater Interest In Pet Health And Wellbeing
Unlike other pandemic-era booms that went bust soon after quarantines lifted, the pet boom began decades before COVID and shows every sign of being here to stay. Today, 62% of Americans own at least one pet (about half of those pet owners have two or more). As pet ownership increases, so does the amount owners spend on their pets. Even as inflation strains household budgets, nearly half of pet owners say they havent made cuts to their monthly spending on their pets.
Inspire Is A Vet Hospital Consolidator With A Flexible, Long-Term Approach To Acquisitions
Inspires approach to consolidation is unique. Rather than an exit-driven strategy, the vet hospital owner structures acquisitions with the goal of owning that hospital for the long term and helping it improve its operations, costs and revenue along the way. Adding a personal touch, the companys CEO personally visits each potential acquisition to interact with the staff and address any concerns. Additionally, Inspire allows each hospital to maintain its unique practice methods and identity, thereby appealing to sellers who are wary of the centralized models of larger competitors. This differentiates the vet hospital owner from most players in the game.
The overwhelming majority of organizations that buy and open veterinary clinics in the United States are owned by private equity investors and managers, said Inspire President and CEO in a recent blog post. Funds are put in, a company is grown, and down the line those investors sell the company to new investors, take profit as a result and then look for another company or industry in which to invest.
In most cases, Carr says that process is happening in the span of about two to five years. Not only is that not enough time to understand the business, it also incentivizes those investors to focus on short-term growth strategies that may or may not make sense for the long-term potential of that hospital.
Instead, Inspire looks for hospitals and clinics that it can own for the long haul, not just opportunities to flip in two or three years for a quick profit. Then, it works closely with each one of those acquisitions to help it achieve sustainable long-term growthan investment of time, talent, and resources that benefits everyone involved.
For shareholders, that approach has the potential to generate more sustainable long-term growth as the hospitals already under the Inspire umbrella continue to grow their revenue while later acquisitions help Inspire expand that revenue base. It also puts Inspire in a unique position to create additional revenue opportunities by expanding existing hospitals, adding on new services, and building a network for case referrals by connecting nearby hospitals and clinics in Inspires expanding network.
For the stakeholders in the hospitals themselves, that acquisition approach alleviates the stress of dealing with new owners who have no intention of sticking around for more than a couple of years and may have little interest in the long-term health of the business. It also gives them access to training and consultation from an experienced team of medical and operational coaches with a deep well of vetted experience. This approach can help improve margins as Inspire consolidates purchasing relationships and provides on-the-ground consulting and training to improve overall operations and identify the best growth strategy for each location.
In its current phase of growth, Inspire is focused on buying existing businesses that are already profitable. As soon as the deal is closed, a growth strategy tailored to that location is implemented.
To date, it successfully applied this approach to 13 locations across nine states for a combined annual revenue run-rate estimated at approximately $19 million for 2023. With multiple acquisition agreements in progress that would add significant future revenue, Inspire expects to see an improvement to its bottom-line performance as well.
Looking ahead, the company plans to acquire 10 locations per year over the next several years using a tried and tested assessment process and a team with functional expertise. This approach is intended to help the company to efficiently scale its acquisition strategy without sacrificing the flexibility needed to bring in locations across any state or demographic market while providing the tailored support each location needs to grow.
As with the past couple of years, Inspire will continue to focus on general practice veterinary hospitals that already have a track record of profitability while diversifying into new clinic types in the years to come. As each new acquisition allows the company to further scale and bring more of its operations in-house, it plans to expand into emergency care clinics and earlier-stage practices as well. Acknowledging the vast market opportunity, Inspire Veterinary Partners notes that less than 30% of the over 28,000 veterinary hospitals in the U.S. have been consolidated, signaling a large upside potential for further acquisitions.
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