Pandemic-era surge in pet ownership continues to feed PE deals

L Catterton, CD&R, TPG and Freeman Spogli are among the top PE firms eager to stake a claim in this hot market.

Like home services, pet care is another market that has proven itself to be recession resistant. Last year, this sector racked up $123.6 billion in sales, an industry milestone, reported the American Pet Products Association. Of that number, $50 billion was spent on pet food, accounting for about 40 percent of all sales within the industry.

Also, let’s not forget that pet ownership surged at the height of the covid pandemic. As people were forced to work from home during lockdowns, one in five US households added a new cat or dog into their home. According to a survey by the APPA, more than 90 million US households currently own a pet.

Private equity leveraged this boom in pandemic-era pet ownership with a slew of deals whose momentum has not ebbed this year. For nearly most of them, the target company’s growth seemed to be catnip to the PE firm. Here are a few noteworthy highlights:

January kicked things off with consumer-focused private equity titan L Catterton’s undisclosed investment in Alliance Animal health, an acquirer and operator of veterinary hospitals for companion animals. Drawing upon its expertise in the consumer healthcare and pet sectors, L Catterton gravitated toward Alliance as it “operates in a highly fragmented market and we see a compelling opportunity to build density in existing markets and expand into new ones,” said Principal Rajan Shah, in a statement at the time.

Hot diggity dog

February might be one of the coldest months of the year but that was not the case when it came to the pet market, which proved it was red hot with Peterson Private Equity’s investment in Pupford, a Utah-based direct-to-consumer pet brand. In addition to owning a library of dog training content, Pupford also sells nutritious training treats and other dog products via its website, app and retailers. With these combined offerings, it was a win-win for Peterson.

“We have conviction on Pupford’s unique customer acquisition and engagement strategy and are excited to partner with the Pupford team in executing their product vision in this next chapter of growth,” said Peterson Vice President Jordan Lusk.

May generated big headlines when Clayton, Dubilier & Rice and TPG Capital announced they had agreed to buy Covetrus, a Portland, Maine-based animal health tech firm, in a take-private deal for about $4 billion. For CD&R, it was an inevitable outcome as the PE firm had initially invested in Covetrus predecessor Vets First Choice in 2015, helping the company grow “from $55 million in revenue focused primarily on online pharmacy in the US to a leading global provider of animal health services with more than $4.6 billion in revenue,” said Partner Sarah Kim.

In June, Rainier Partners capitalized on the pet ownership boom by investing in Pet Food Express, a California-based pet retail chain that sells everything from pet foods and supplements to services like pet washes. PFE’s growth and profit potential attracted the Seattle lower-middle-market PE firm to make its first-ever investment in the company.

“Not only does PFE align with Rainier’s investment focus in the consumer services sector,” said Rainier co-founder and Managing Partner Alex Rolfe, “but the company’s commitment to doing what’s best for pets and their potential for growth elevate this partnership into something truly exciting for everyone involved.”

August’s dog days of summer unfolded with Freeman Spogli making an undisclosed investment in EverVet, a Conshohocken, Pennsylvania-based vet services platform. Founded in 2020, EverVet operates 21 veterinary clinics across markets primarily in the Mid-Atlantic, Northeast and Southeast. EverVet’s expansion was a huge enticement for Freeman Spogli to ink the deal.

Said Chris Johnson, a partner at Freeman Spogli, “EverVet stands out in the attractive veterinary services market by being a preferred partner to veterinarian business owners and having a proven track record of attracting and retaining high-quality employees given the company’s strong veterinarian-led culture.”

As we head toward the end of the third quarter, it remains to be seen whether the deal volume in the pet space will be as active for the remainder of the year as it was during the first half. But based on the strength and robustness of this market, the verdict is very positive.