Rapid consolidation in recent years has seen national chains of vet practices become established. These chains have built up strong local positions in several parts of the UK.

Aldwych Partners considers that there is an increasing risk of the Competition and Markets Authority (CMA) reviewing further expansion by these chains. This could include acquisitions of further practices in areas where a chain already has a strong presence as well as mergers between chain operators.

Where the CMA has concerns it may prohibit planned acquisitions or unwind completed transactions. Most combinations between the UK’s largest veterinary chains would be likely to require divestments of local practices to secure CMA clearance.

National overview

Nearly half of all UK vet practices are operated by seven major chains. Market consolidation is more advanced in England (where the seven chains own around 46% of all practices) compared with Wales (37%), Scotland (33%) and Northern Ireland (24%).

Operator Share of UK vet practices
Independent Vetcare 12%
Pets at Home 9%
CVS Group 9%
Vet Partners 6%
Medivet 5%
Linnaeus Group 2%
Goddard Veterinary Group 1%

The major chains, other than Independent Vetcare, all have their strongest presence (in market share terms) in England. Independent Vetcare, however, which operates 12% of all vet practices in England owns 17% of all practices in Wales, 16% in Scotland and 13% in Northern Ireland.

In addition to the seven major chains, we understand that several smaller chains are also expanding, while many other vet practices continue to operate under a traditional partnership model.

Areas of local concentration

The major chains’ market shares at a national level are relatively small, but most have a strong presence in several local areas. This build-up of local concentration is driving increased competition risk in the sector.

This competition risk takes two forms. First, where major chains have a strong market presence in the same local areas, there may be challenges in securing clearance for mergers between these chains.

Some combination of three out of the seven major chains own at least 50% of all vet practices in over 70 local authority areas. In 50 of these areas, it is more than 60% of all practices. In North Tyneside, and some other areas, three major chains operate all vet practices (see map above).

Second, where a single chain – on its own – operates many practices in a local area, then further expansion in that area may run into merger clearance challenges – potentially even where this involves buying individual practices.

For example, in York, 15 out of 24 vet practices are owned by a single chain, while in Newport, another chain operates 7 out of 9 practices (see maps above and below). There are nearly 20 local authority areas where a single operator owns half or more of all vet practices.

Some chains have a strong presence that stretches across several local authority areas. One operator has 50% of vet practices in Birmingham, 58% in Wolverhampton, 53% in Walsall, 44% in Sandwell and 39% in Dudley (see map below).

Will the CMA start reviewing vet sector M&A?

Low profile consolidation, often through acquiring single practices, means the CMA (and its predecessors) are yet to review any transactions in the sector. (The only formal competition authority investigation in the sector was into vet medicine prescribing by the then Competition Commission in 2001-02.)

Increasing awareness of sector consolidation, however, and higher profile transactions (such as the acquisition of Linnaeus Group by Mars Petcare) has increased the risk of the CMA starting to review vet sector M&A activity.

Can the CMA review single practice acquisitions?

The CMA could review a single practice acquisition where the combined business has a local share of supply greater than 25%. Local authority areas are frequently used as the basis for this test. Aldwych Partners’ analysis indicates that in nearly half of all UK local authority areas at least one major chain owns more than 25% of vet practices.

While this indicates that the CMA may have jurisdiction over many transactions where a chain is strengthening an already strong local presence, it does not mean that the CMA will actually review these transactions, or if it does, that it will conclude that the acquisition is problematic. (Factors that the CMA will consider in deciding whether a merger or acquisition raises concerns are set out in the next section.)

Where local market turnover is less than £5 million, the CMA may decide not to investigate at Phase 1, and where it is less than £15 million, the CMA may decide that a market is not sufficiently important to justify a detailed investigation at Phase 2.
Our view, however, is that the risk of a CMA review increases where a chain already controls most of the practices in a local area, and this risk is increasing.

How would the CMA analyse a vet sector merger?

Consistent with its approach in other markets, the CMA could be expected to take a practice-by-practice approach to reviewing vet sector mergers. This would involve reviewing the level of competition faced by each vet practice pre-merger, and the merger’s impact on that level of competition.

Factors such as local market shares, the distribution of practices within the local market, and service-level differentiation between vet practices (e.g. types of animals that are treated) would all be considered.

Which national vet chain combinations might be most difficult?
A high-level assessment based on local area overlaps (rather than individual vet practices) indicates that most combinations between the major chains would be likely to raise concerns for the CMA, such that divestments may be necessary to secure merger clearance.

Those involving Linnaeus Group and Goddard Veterinary Group, however, are likely to be the least problematic given the former’s fairly even spread of practices across the UK, and the latter’s concentration in London.

A health warning …

This note provides a high-level assessment using publicly available data. While we believe the broad conclusions in this note are correct, the individual numbers presented in this note are subject to correction.