Berkshire Partners backs Imperial’s VetStrategy in $1bn-plus deal

Underscoring investor appetite in the recession-proof sector, a deal was signed only about a month after the Canadian vet-care company hit the market.

Berkshire Partners’ investment in Imperial Capital‘s VetStrategy values the Canadian veterinary services network just north of CAD$1.4 billion ($1 billion), according to people familiar with the matter. 

The transaction closed on July 31, only about two months after a formal sale process for the Woodbridge, Ontario, company got underway, sources said. Jefferies provided financial advice to VetStrategy. 

Upon completion of the deal Berkshire holds a stake of around 75 percent to 80 percent in the company, some of the people said. VetStrategy’s executive team, led by CEO Orin Litman, has retained a large equity stake alongside its veterinary partners in Quebec.

Based on the company’s approximately CAD$65 million in adjusted EBITDA projected for 2020, the company scored an implied deal multiple of approximately 22x, sources said. 

Imperial’s investment in VetStrategy dates back about seven years. Led by the firm’s Managing Partners Justin MacCormack and Jeffrey Rosenthal, the Toronto-based mid-market firm invested in the company in 2013 through both Fund IV and Fund V.

Berkshire’s deal team on the investment included Chris Hadley, Ben Levy, Whitney Kelly and Samir Mathrani, according to the firm’s website. 

Shaking hands on a deal for VetStrategy in late June, Berkshire prevailed over other large buyout firms in what sources characterized as a focused but competitive sale process, sources said.

The firm initially agreed to a full equity backstop, which means the sponsor committed to underwrite the full purchase price with equity and the ability to obtain debt financing later, one source said.  

More than CAD$500 million in debt financing has since been raised, another source said. 

Launched in 2006 by co-founders Litman and Jon Shell, VetStrategy has grown to 158 hospitals across nine Canadian provinces. VetStrategy works with its partners to acquire ownership in veterinary hospitals, and then helps in management of those practices. The company also supports independent veterinarians through Globalvet and VetAlliance, two of Canada’s largest veterinary buying groups. It also partners with Chiron, a compounding pharmacy in Canada.

Berkshire’s investment will allow VetStrategy to continue to provide succession options for independent owners in the Canadian market. The business has been refinanced on a regular basis over the last few years to keep up with the demand in the market, sources said.

VetStrategy is further evidence that the veterinary care industry has proven insulated from the recession, remaining a highly sought-after area of investment through the global pandemic. 

While businesses shuttered their doors nationwide in response to the covid-19 outbreak, veterinary services were declared essential businesses in all 50 states in the early phases of the crisis. 

The deal comes on the heels of TSG Consumer Partners’ completion of a majority acquisition of Morgan Stanley Capital Partners’ Pathway Vet Alliance in April. Harris Williams, Morgan Stanley Investment Banking and Jefferies advised on the sale. 

Signed in March, the transaction was valued at approximately $2.65 billion, or around 18x the company’s $150 million of EBITDA, PE Hub reported. MSCP retained a significant minority investment in Pathway alongside management. 

For Berkshire, VetStrategy joins existing healthcare investments including Affordable Care, Precision Medicine Group and U.S. Anesthesia Partners

Berkshire, Imperial and VetStrategy declined to comment. 

Action Item: Check out Berkshire’s latest Form ADV. 

Update: This report has been updated to include detail on VetStrategy’s former majority owner, Imperial Capital. The story further clarifies that VetStrategy partners with Chiron as opposed to operating the compounding pharmacy.