Vets Central an emerging major with a new approach to consolidation in the veterinary sector

In just over three short years, Vets Central has grown to become the third-largest veterinary practice operator in Australia through a unique business model established and driven by co-founder and CEO Keith Nicholls.

Following a year of planning and preparation to a fledgling launch in 2021, Vets Central currently has a network of 58 veterinary practices nationally with Nicholls revealing that the group’s significant growth has been achieved amid a challenging time for the sector.

“While we have seen the industry pull back from the highs of the pandemic, the underlying trend of people humanising their pets continues at a rapid rate and this supports our plans for the future,” says Nicholls (pictured).

After spending 15 years in corporate consolidation businesses, including a period with National Veterinary Care, Nicholls established Vets Central with a view to shaking up the sector by adopting a “non-corporate” approach that respects the legacy and autonomy of practices being acquired, while providing a robust support system to deliver sustained growth and improved efficiencies across its network.

“We have grown at a rapid rate as a group in recent years, but what is most pleasing is that we have also seen business growth within our many practices,” says Nicholls.

“This is being achieved in several ways but central to our strategy is to ensure that our practices and their team members maintain good relationships with their clients.

“Our aim is to preserve the legacy of the practices that we acquire. Ultimately when the vendor eventually decides to leave as part of a succession plan, we want them to look in the rearview mirror and be proud of the fact that their team is well looked after, and that they are really happy to have sold to Vets Central.”

Vets Central is now the third-largest companion animal veterinary group in Australia, behind Greencross Vets and VetPartners.

The group is backed by Sydney-based private equity group Pemba Capital Partners which came on board via a capital raise in 2021.

“Pemba has been a really good strategic partner for us,” says Nicholls.

“We started our journey with them in September 2021 with our first seven practices and now we are sitting at 58 practices with another five due to transact shortly.

“Pemba has been a fantastic partner in the sense that their core ethos is also around people. They understand that if we invest in our people, our business will improve.”

Critical to Vets Central’s growth strategy has been a unique approach to partnering with stakeholders involved in the veterinary practices that it acquires. Embedded in the transaction are flexible earn-out arrangements for vendors and an industry first incentive plan that incentivises key team members.

“It is critical that we look after the associate veterinarians just as much as we do the vendor and do our best to make sure that they stay,” says Nicholls.

“Our innovative initiatives include our You’re Pawesome Bonus/Equity program for our veterinarians and a unique, industry-first fair earn-out process for our vendors.

“We want our vendors to actually achieve their earn-outs and not be blind sighted by adjustments other groups may impose during their earn-out period. We don’t mark up to mark down; it’s something that we are really proud to have achieved.

“The You’re Pawesome long-term incentive plan also allows associate vets to still have skin in the game and be recognised for their efforts and contribution to a practice after a Vets Central acquisition.”

The long-term incentive program essentially comprises a three-year timeframe that offers veterinarians cash bonuses and potential conversion to equity under the scheme.

Sustaining staff retention rates

This model has helped sustain staff-retention rates through ongoing professional development and by implementing recognition, reward and legacy initiatives for key operational team members.

“This has been a real worthwhile program for us,” says Nicholls.

“People are starting to recognise it from a recruitment perspective with more vets coming to us and looking to join our network.

“In an industry that is suffering a shortage of vets, and we are not exempt from that, we have been able to navigate this issue significantly through our EVP (employee value proposition) efforts and through the You’re Pawesome program.”

Nicholls notes that the scheme in its own right has accrued just under $2 million worth of entitlement to team members in the Vets Central group.

“Other corporate groups would likely want to pass this to shareholders, but that doesn’t fit with our ethos, our people deserve to be rewarded” says Nicholls.

The initiatives implemented by Vets Central follow extensive research by Nicholls into the sector prior to establishing the company.

“I specifically went about looking to form a model that is corporate by compliance but with an ethos that governs how we engage with our practices, vendors and team members that is very much non-corporate in nature,” he says.

“The business we acquire may have been their owner’s baby for 10, 20 or 30 years. It has been a hard slog and they may be getting frustrated with the additional red tape around HR and Fair Work reforms.

“They also may not understand all aspects of marketing and the increase in digital marketing, social media and online bookings and how to be competitive in that space, and they are looking for some assistance with these business essentials of today.”

Nicholls says that typically practice owners may not necessarily want to exit completely or retire from their business, but rather “simply slow down”.

“It might be that they have gone from full-time to part-time, or part-time to casual, but by and large they want to stay with the business,” he says. “The point is that they love what they do - and we want them to continue doing it.”

Strong record of successful earn-outs

Nicholls cites the high level of earn-outs achieved by veterinary practice owners joining Vets Central as one of his major personal achievements in the business.

“Approximately 98 per cent of our vendors who have completed their earn-outs, have not be subjected to any earn-out adjustment.

“But what is more pleasing is that in the post earn-out journey, we have retained approximately 80 per cent of those vendors in the business. That is generally unheard of in a corporate consolidation business.

“This has helped us create a group of high-quality veterinary practices that are performing really well.”

Nicholls says the strength of the group’s existing portfolio reflects the acquisition of quality businesses, supplemented by strategic improvements delivered after they join the group.

“Through new recruitment, resources and systems, we have been able to add value to these practices,” says Nicholls, noting that all Vets Central practices and team members have access to the group’s support centre based on the Gold Coast.

“It’s not a head office but rather a support office that provides a variety of tools from HR, recruitment, IT, marketing, finance, operations and payroll. All of these tools are available to all our veterinary practices to embrace and to assist them on their growth journey.”

While Vets Central is taking a measured approach to growth, Nicholls has ambitions to more than double the business to between 150 and 200 practices over the next three to four years.

“I want to make sure we do that in a balanced way as I never want team members to feel like they’re just one in a thousand,” he says.

“I am determined that as we grow I still want our team members to feel like they are part of an independent business with a broader support team behind them. I am incredibly proud of our team members and ensuring we can juggle their needs will determine how fast we grow and how big we get.”