As valuations for veterinary care companies continue to reach new heights, one strategic buyer is proving a tough contender to beat yet again.
National Veterinary Associates, backed by the Reimann family’s JAB Investors, is plunging deeper into specialty vet care with the acquisition of Ethos Veterinary Health, according to sources familiar with the matter.
The deal, signed over the past few days, commanded an enterprise value of $1.65 billion, some of the people said. People familiar with the Bank of America Merrill Lynch-run sale process previously placed Ethos’ marketed adjusted EBITDA at around $60 million, however sources added that estimated 2022 EBITDA is in the mid-$70 million range.
Upon completion of the transaction, the shareholders in Ethos will roll a portion of stock into NVA, sources said.
For JAB’s NVA, the transaction comes just weeks after it bought a similar, slightly smaller specialty vet care asset, SAGE Veterinary Care. The June deal, providing an exit for Chicago Pacific Founders, commanded an enterprise value of $1.1 billion off of approximately $50 million of EBITDA, concluding a Jefferies-run process, sources told PE Hub.
NVA, through the back-to-back acquisitions, is quickly inheriting what sources characterized as the largest remaining independent vet platforms with an exclusive focus in specialty vet care. Post Ethos, specialty vet care will represent approximately 35 percent of NVA’s total revenue, one source said.
The businesses join NVA’s Compassion-First, a specialty and emergency vet network it acquired from Quad-C in February 2019 for a total enterprise value of $1.22 billion, including post-closing tax benefits.
NVA, for its part, has more than doubled in size in terms of revenue since JAB Investors bought the business for $5 billion in June 2019, just a few months after the Compassion-First deal.
JAB Investors’ moves to build out NVA’s specialty vet operations come as the Luxembourg-based conglomerate reportedly considers an IPO of the business. Bloomberg wrote in May that NVA could seek a US listing later this year or in early 2022.
Ethos, led by CEO and co-founder Ames Prentiss, was formed in 2015 through the marriage of four specialty hospital groups spanning the northeast US, Chicago, Denver and San Diego. The company, which has grown to 23 hospitals, offers services include 24/7 emergency care, surgical procedures, radiology services and internal medicine, among other specialty offerings.
Ethos’ existing PE backer also looks poised to make out well with the deal. In January 2019, BBH Capital Partners took a minority stake in the Woburn, Massachusetts business with its recapitalization.
Although terms of its initial investment weren’t disclosed, sources told PE Hub ahead of the early 2019 deal that Ethos was expected to trade hands at an around $300 million value – suggesting the asset has grown by more than 5x in value through BBH’s investment.
The recent bets by JAB-backed NVA reflect investors’ strong appetite for assets in veterinary care, an industry whose recession resilience has only proven out through the pandemic. EBITDA multiples in the pandemic era have surpassed 20x, reaching the mid-to-upper 20x range depending on which EBITDA figure is applied. That’s up from multiples in the upper teens to 20x range that those assets commanded a few years ago.
Notably, IVC recently scored an additional aggregate investment of €3.5 billion ($3.62 billion) that assigned the company an enterprise value of approximately €12.3 billion. The deal, coming after the vet giant abandoned plans to list on the London stock market, valued IVC at almost 30x forward EBITDA, Reuters wrote.
With the ICV transaction, existing investor EQT made an additional investment through EQT IX, while Silver Lake joined as a new substantial investor and minority investor Nestlé also increased its stake.
In other recent activity, Oak Hill Capital, eager to get back into the space after quietly exiting a stake in a larger industry asset, pre-empted a sale process earlier this year for American Veterinary Group. The firm struck a $400 million-plus deal for the company, PE Hub wrote in February.
JAB Investors and NVA declined to comment. BBH and Ethos did not immediately respond to PE Hub‘s requests for comment.