On 7 September 2023, 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 in which veterinary practices are owned over recent years has changed dramatically with independent practices accounting for 89% of the UK veterinary industry in 2013 and compared to approximately 45% in 2021.
As a result of the significant increase of corporate presence in the veterinary sector, the CMA wants to ensure that pet owners are getting value for money and are clear on the ownership of the vet practices they visit or where their pets receive treatment from.
What can the CMA do?
The CMA has the power to take action against companies that they find have breached competition laws and can, in extreme cases, force companies to divest – or sell off – business. This is a formal, statutory process which can take time and will be costly for the relevant company being forced to divest. We have seen that the CMA has taken an active interest with acquisitions made by VetPartners, Independent Vetcare (IVC), CVS Group plc and more recently Medivet.
Julian Maitland-Walker, Partner at competition law specialist firm Maitland Walker, says “The CMA has a wide-ranging set of powers which can severely disrupt acquisitions or disposals several months after the event. Where the CMA orders divesture, companies have to work in tandem with the CMA to ensure any details are compliant and assuage concerns harboured by the authority.”
Impact on transactions
Whilst there is still M&A activity in this sector, we have found that deals are taking longer to completion which could be a result of corporate buyers being more cautious and seeking the approval of the CMA before proceeding with a transaction. As mentioned above, if the CMA issue an order following completion of a transaction, the corporate will incur significant costs to divest the business, which 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 and exchanged with the transaction not legally completing until the CMA has given its approval to the transaction.
It is therefore important that the transaction documents provide a seller with as much certainty and control as possible whilst this process is ongoing. Alongside this, they should adequately deal with the process if the CMA is unwilling to approve the transaction. Our veterinary sector specialists 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 corporate, or are in the process of 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.
Our veterinary team has advised a number of clients on their sale to corporates and has a wealth of experience in guiding independent practice owners through the process when CMA approval is sought by the buyer.