Some transactions are game changers, while others emphasise the fact that we are acting in a truly global market. No matter where you look specifically, one thing is evident: doing deals in the pet care market is becoming increasingly popular among strategic acquirers as well as financial investors.
Investing in pet health experts
The most notable transaction was probably the acquisition of VCA by Mars. In January, the US food giant paid an astonishing 9.10 bn dollars to take over 800 veterinary hospitals in the US and Canada as well as more than 25 000 employees. Although Mars has been particularly popular for its food business, it has made significant investments in the healthcare services sector in recent years, including prior investments in Banfield Pet Hospital, Bluepearl and Pet Partners. Today, it operates more than 1 900 locations across Northern America. Mars' move is in line with the expectation of many pet care experts: pet health is becoming an increasingly important issue, not only for American but also for European pet owners. However, especially in mainland Europe, the market sphere is very fragmented with only very few large chains of veterinary clinics. With the US always a few years ahead of the European market, it seems only a matter of time before more transactions take place.
The transaction is also a clear indicator that many players are no longer staying within their given role. This becomes particularly clear when looking at PetSmart's takeover of Chewy, Inc., which reads as the largest brick-and-mortar retailer acquiring the largest online trader. With an enterprise value of 3.35 bn dollars, it was in fact the largest takeover ever of an e-commerce company.In only six years, Chewy has grown from zero to nearly 2 bn dollars in revenues. However, Chewy has not achieved profitability yet, and some industry veterans are sceptical that it ever will because of its high customer acquisition costs. Although the purchase price may be strategically motivated, it seems likely that there may be another motive, which has always been a driver of high purchase prices: the fear of failure. In the past, there have been other sectors which underestimated the power of e-commerce and many brick-and-mortar retailers in these sectors ultimately had to file for bankruptcy. Thus, the acquisition supported PetSmart in defending its leadership position in pet care, but the question is for how long due to growing competition from Amazon.