Oak Hill Capital appears to be getting back into the popular veterinary care space after quietly exiting a stake in a larger industry asset last year, people familiar with the matter told PE Hub.
The New York private equity firm is said to have put a quick stop to the auction for private equity-backed American Veterinary Group, preempting a Harris Williams-run sale process at the IOI stage, the people said.
Although not yet announced, sources said a transaction is anticipated to be valued around $400 million-plus. AVG was marketed off of $18 million in LTM EBITDA as of October 2020, two of the people said.
Two sources said AVG traded hands at a 21x multiple, one of whom said the multiple was based upon a higher pro forma EBITDA figure that accounts for the platform’s recent deal activity.
Latticework and Trive invested in AVG in 2015 – the year of its founding – at which point it encompassed five animal hospitals in Florida, an announcement at the time said. It is unclear if Latticework and Trive plan to retain investments in AVG.
Suggesting a nice outcome for its current investors, AVG today owns and operates more than 50 veterinary practices across six southern states including Florida, South Carolina, North Carolina, Georgia and Texas. Its network includes small and mixed animal general practices, as well as its UrgentVet Pet Clinics, which AVG says bridges the gap between daytime general practice and overnight emergency care.
The urgent care model is relatively unique to AVG, one of the sources noted.
For Oak Hill, the transaction comes after the firm in 2020 quietly exited its investment in one of the country’s largest vet care chains, VetCor – generating a nice gain after a short hold, four sources said.
Although an announcement was never made, three of the people said Oak Hill sold its stake back to fellow VetCor shareholder Harvest Partners. Further, VetCor is listed as a realized investment on Oak Hill’s website.
New York’s Harvest and Chicago’s Cressey & Co. originally invested in VetCor in April 2015, following which Oak Hill joined as an investor through the recapitalization of AVG in mid-2018.
While terms of the 2018 transaction weren’t disclosed, the sponsor-focused auction was anticipated to produce a valuation north of $1.5 billion, PE Hub reported ahead of the announced deal.
Oak Hill invested in VetCor through its fourth fund, which collected $2.65 billion in July 2017.
The firm in January closed Oak Hill Capital Partners V, an approximately $3.8 billion pool of capital that significantly surpassed its $3 billion target.
Harvest’s eight flagship fund, originally targeted to raise $3.25 billion, collected more than $4 billion, Form D documents published in December 2019 show.
Oak Hill’s related investment experience in animal health dates back much further, however. In 2005, the theme-based firm combined two companies to create Butler Animal Health Supply, alongside Darby Group.
In 2009, the platform merged with Henry Schein’s US animal-health business to form Butler Schein Animal Health, and Henry Schein assumed slight majority control of the distributor of animal health products. The PE firm in 2012 exited its remaining interest in full.
Further validating a market that investors have long touted for its durability and sustained growth regardless of market conditions, vet care has proven resilient through the pandemic.
In recent notable activity, Europe’s largest veterinary chain IVC Evidencia earlier this month scored an additional aggregate investment of €3.5 billion ($3.62 billion) that assigned the company an enterprise value of approximately €12.3 billion.
With the transaction, existing investor EQT made an additional investment through its EQT IX fund, while EQT VII partially exited its stake but remained invested in the company. Silver Lake joined as a new substantial investor in IVC, while minority investor Nestle also increased its minority stake.
Morgan Stanley Capital Partners in April 2020 completed its majority sale of Pathway Vet Alliance in the midst of a horrible downdraft in the markets, scoring one of the last syndicated LBO loans to get done before debt markets largely shut down.
Oak Hill, Latticework and Harvest declined to comment. Harris Williams and Trive did not return requests for comment, while AVG could not immediately be reached.