GPs embrace the animal health sector

As people increasingly see their pets as part of the family – with all the extra spending that implies – private equity has embraced the animal care sector.

One area that’s been particularly attractive is animal pharma, where GPs are finding small regional and international players in diverse pockets of an industry that is ripe for consolidation.

“Whether it’s food or pharmaceutical products, pet care spending has been very stable and growing,” Collin Abert, managing director at RF Investment Partners, tells affiliate title PE Hub. RF acquired pharma manufacturer Amici Pharmaceuticals last year.

“If you look at a stable and growing environment like animal health in today’s economy, there’s a positive outlook for one, two or three years out. That is somewhat unique in today’s market environment.”

Greater concern for animal wellbeing is leading to demand for pet medication, incentivising PE to invest in animal-focused pharmacies. By acquiring such a business, a PE firm can help grow its value by digitalising their commercial processes and integrating new sales channels, such as home delivery.

Partners Group-backed Wedgewood Pharmacy in July 2024 announced the completed integration of Precision Equine Pharmacy, which Wedgewood acquired in 2023 as part of a merger with online veterinary pharmacy and home delivery service Blue Rabbit. The deal added digital technologies for veterinarians to better manage prescriptions and facilitate home-care delivery to pet owners.

“There are a lot of PE firms interested in a scaled asset like ours, but you really in this case have a lot of strategic companies out there looking to grow in the kind of space that we’ve done really well at,” says Benjamin Breier, partner and global co-head of healthcare and life sciences at Partners Group.

More recent deals include two by Mixlab, a New York-based veterinary pharmacy backed by Monogram Capital Partners: Mixlab acquired the Pet Apothecary, a pet pharmacy in Milwaukee, and the veterinary business of compounding pharmacy SBH Medical in Columbus, Ohio, in January. The add-ons expanded its Midwest footprint and tripled its veterinary partners network in the region. Also this year, London-based mid-market firm Inflexion exited from pet supplement business Lintbells, selling its investment to Vetnique Labs for a 5.5x return.

Pharma deals

According to Breier, there will be new opportunities for PE to invest in specific drug products in the coming years – particularly generic drugs, as patents for legacy blockbuster pharma products expire. “Animal pharma is in many ways on a similar curve as human pharma, but a little bit behind. I think we’ll see a continued customisation of products as we better understand how to treat specific animals.”

With less scale than human pharma, PE firms see opportunities to consolidate small and medium-sized animal pharma suppliers into regional and international platforms. Local suppliers are looking for PE dealmakers to help expand their businesses into new geographies and enter adjacent markets to grow their customer bases. PE investors can also help these businesses navigate different regulatory requirements by country and reduce costs per unit.

“There’s a logic to being present in multiple markets and having scale when distributing third-party pharma products,” says Simon Damkjær Wille, a partner at Polaris, which took a majority stake in veterinary pharma business Salfarm last year. “As a pharma distribution business with scale, it’s easier to do business because you cover more markets, have deep insights about local regulations and it’s easier to move into having your own registrations and products fully adapted to local markets.”

In March, PAI Partners announced its acquisition of Nuzoa, a Madrid-based distributor of animal health products and services in Iberia, from Abac Capital. Under Abac, which founded the company in 2020, Nuzoa increased its geographical reach via 13 acquisitions. PAI Partners plans to pursue additional consolidation.

“For private equity, the animal health industry is a sweet spot to be in,” said Wille. “You have a growing and attractive market and takers with a high strategic rationale for acquiring well-run businesses. In the years to come, there will still be general interest in the space and a lot of consolidation to take place in the fragmented landscape.”