Q4 Retrospective & 2023 Forecast: How Does the Broader Economy Affect Veterinary Practice Sales Here and Beyond?

Rich Lester: Hi, everyone. I’m Rich Lester, Co-CEO of Ackerman Group. Welcome to our Q4 Retrospective and 2023 Forecast.

In this webinar, we’re going to talk about how the broader economy is affecting veterinary practice sales. We’ll cover topics like:

• How macroeconomic forces (interest rates, inflation, war, etc.) are currently affecting veterinary practice sales and deal structures.
• Where EBITDA multiples land for individual veterinary hospitals at present and how we predict they’ll trend in the future.
• What shifts we see on the buyer side (recapitalizations, IPOs, etc.), and how they play into the fate of your veterinary practice sale.

Let’s start by talking about the macroeconomic forces that are currently affecting veterinary practice sales.

Macroeconomic Forces

The past few years have been a period of economic growth and prosperity for the United States. This has led to a surge in demand for veterinary services, as pet owners have more disposable income to spend on their furry friends.

However, the global economy is starting to show signs of strain. Inflation is rising, interest rates are increasing, and there is uncertainty about the war in Ukraine. These factors could all have a negative impact on veterinary practice sales in the near future.

Interest Rates

One of the biggest concerns for veterinary practice sellers right now is the rising interest rates. When interest rates go up, it becomes more expensive for buyers to finance a practice acquisition. This can lead to lower valuations and fewer deals being done.

Inflation

Inflation is another factor that could impact veterinary practice sales. When inflation is high, it can eat into the profits of businesses, making them less attractive to buyers. This is especially true for businesses that rely on a lot of debt, such as veterinary practices.

War in Ukraine

The war in Ukraine is also a wild card that could affect the veterinary practice sales market. The war has caused economic uncertainty and volatility around the world, which could make buyers less likely to invest in new businesses.

EBITDA Multiples

Despite the challenges facing the economy, veterinary practice sales are still strong. In Q4 2022, the average EBITDA multiple for veterinary hospitals was 6.5x. This is down slightly from the peak of 7.0x in Q2 2022, but it’s still well above historical averages.

We expect EBITDA multiples to remain strong in 2023, but they could start to decline if the economy weakens.

Buyer Activity

The buyer activity in the veterinary practice sales market is also strong. In Q4 2022, there were over 1,000 veterinary practice transactions completed. This is up from 800 transactions in Q4 2021.

We expect buyer activity to remain strong in 2023, but it could slow down if the economy weakens.

Conclusion

The veterinary practice sales market is facing some challenges in 2023, but it’s still a seller’s market. If you’re thinking about selling your practice, now is a good time to do it.

However, it’s important to work with a qualified broker who can help you navigate the current market conditions and get the best possible price for your practice.

Thank you for watching. If you have any questions, please don’t hesitate to contact us.