For the past five years, Ireland’s 747 veterinary practices have been operating in a fast-changing industry where outside investors increasingly buy into local businesses. “Ownership really started to change at the end of 2017 and into 2018. It followed the model that was happening in the UK for the previous 10 years where it was corporate entities, private equity money, which were buying a lot of veterinary practices,” says Mark Butler, managing partner of accountancy firm HLB Ireland

He spoke on this week’s podcast, which you can listen to above or on our podcasts page.

“You wouldn’t know it from the outside as the practice still says the same size, the same name, etc. But it’s a corporate owner behind it who has bought the goodwill and the practice from the historic owners, who would normally be sole trade vets.”

Butler explains that the trigger for change at the end of 2017 was clarification from the Veterinary Council of Ireland, which regulates the industry, that it was only concerned with the practice of veterinary medicine – not the corporate form adopted by vets for their businesses. This cleared up an apparent contradiction until then that veterinary practitioners could not incorporate their practices under the profession’s Code of Conduct.

The Currency previously covered the entry of overseas investors into Ireland. Butler says the main corporate players in the sector are now the international groups CVS, IVC-Evidensia, Mars-owned Linnaeus, Vet Partners, as well as the Irish group Highfield Veterinary. 

Incorporating, however, does not necessarily mean selling out. Also speaking on this week’s podcast, Pete Wedderburn, co-owner of Bray Vet in Co Wicklow, says that he transformed his previous 50-50 partnership with another vet into a limited company more than four years ago, still with the same owners.

“My co-owner and I got advice in two areas, first of all, in succession. We’re both in our late 50s, early 60s, and we’re having to look to the future as to what’s going to happen with the practice,” Wedderburn said. “If you have a limited company, then you can set aside smaller amounts, like 5 or 10 per cent, to a wider number of staff members – perhaps vets, perhaps senior staff, veterinary nurses or whatever. If you’re a limited company, you have many more options when it comes to succession.” The other reason was to be tax-efficient when investing new capital in the business.

Even with this now in place, Wedderburn wishes he had taken time out of the busy day-to-day job of running his practice to start planning its transformation for succession earlier. 

“There’s a bit of a trend towards not wanting, if you like, to sell their soul to the business.”

Pete Wedderburn

One of the reasons why this needs to be prepared so carefully is the lack of candidates to take over the responsibility of owning the business. This was evident in the recent survey of owners and staff at Irish vet practices conducted by HLB Ireland for the sixth consecutive year. “It showed that 30 per cent of vets surveyed are thinking about selling their practice in the next 12 months, where on the other side there are only 2 per cent of survey respondents aspired to open to owning a veterinary practice,” says Butler.

This is despite vets reporting very high levels of job satisfaction, comfortable incomes and 48 per cent of survey respondents being positive about the future of their business.

The absence of successors, in turn, feeds into the opportunity for overseas investors to acquire Irish vet practices. Another reason is finance: “The price that they pay is very different as well historically to what vets can raise to pay for the business. That’s another big factor in it,” says Butler.

Wedderburn attributes the lack of new vet entrepreneurs, along with wider recruitment difficulties, and the transition to a more common corporate model, to a cultural shift in the way people work in the industry. “There’s a bit of a gap there from the point of view of the traditional model, where you’d have a young male vet qualifying, going into practice, working full time, 60 or 70 hours a week, for 30 to 40 years. That’s changed,” he says.

A driver for that change is the fact that the gender profile of the profession has reversed, with 80 per cent of vets qualifying now being female. Like most industries, the veterinary sector is seeing a shift in work-life balance as a key driver for employees and with a scarcity of staff, vets have more options available to them, Wedderburn says. “There’s a bit of a trend towards not wanting, if you like, to sell their soul to the business. They would prefer to have a reasonable working life and a good work-life balance.”

Both Wedderburn and Butler say the evolution of vet practices towards a more corporate model has allowed this to happen, with more and more use of outside help for HR, technology and business management in general, whether through consultants or back-office functions centralised at group level.

When a vet does decide to incorporate in preparation for their succession or to sell their business, Butler’s advice is to double-check that all documentation is in order every step of the way – especially in two areas.

“The number one issue that we find with selling businesses is where there is property involved,” Butler says. Unclear ownership or the leasing of premises, and sometimes planning issues, can throw a spanner in the works.

The second area that arises is taxation. How the company is incorporated along with the way it is taxed post-incorporation can all raise issues to be addressed in the due diligence process. There are nuances for taxation in the veterinary sector as it is a professional service, so it’s important to get advice from a firm that has experience dealing with veterinary companies. A large unexpected tax bill is the last thing you want to come up at the time of a transaction.

This all makes professional advice all the more valuable, especially if dealing with an outside investor: “Usually you’re selling to a large corporate who have done hundreds of these deals,” Butler says.

HLB Ireland is hosting an ‘In conversation’ event with ‘Leaders of Innovation’ on April 20, supported by The Currency, with guest speakers Colum Lyons, chief executive of ID-Pal, David Shackleton, former CEO of Openback, and Geraldine Ruane, chief executive of the RDS. To register your attendance click here.