Ownership of companion animals is rising across the globe, and the US is no exception.
As of 2024, 66% of US households—about 86.9 million homes—owned a pet.
From companionship to emotional support, pets have become a vital part of their owners’ lives.
Americans are also spending more than ever on their furry companions.
According to the American Pet Products Association, Americans spent $152 billion on pets in 2024, with nearly $40 billion going toward vet care and related product sales.
For private equity firms, this growing trend has opened up a lucrative business opportunity.
Data from PitchBook shows that private equity invested $51.6 billion in the veterinary sector between 2017 and 2023, followed by another $9.3 billion in just the first four months of 2024.
However, private equity’s increasing ownership of veterinary clinics has critics sounding the alarm that its growing presence could have the same consequences that PE’s increasing ownership of hospitals has had- rising prices, reduced services and even closures aimed at maximising shareholder returns.
Against this backdrop, Inspire Veterinary Partners (NASDAQ: IVP) is claiming to position itself as an alternative to the PE-backed model.
Its approach emphasises long-term clinic ownership, employee stock ownership plans (ESOPs), and growth strategies focused on team investment, rather than the typical three-to-five-year asset roll-up and exit pursued by private equity firms.
“Inspire’s founders and leaders include veterinary professionals, and we select clinics for purchase with the desire to maintain those clinics for the long term and make growth plans accordingly,” IVP CEO Kimball Carr tells Invezz in an interview.
“We aim to provide a new path to multi-unit clinic consolidation driven by investing in our teams and, crucially, providing a path to shared equity.”
Carr also spoke about the company’s recent $10 million convertible preferred stock transaction, its growth strategy, and how Inspire plans to address challenges like labour shortages and rising veterinary costs.
Excerpts:
Kimball Carr, CEO, Inspire Veterinary Partners
Challenges of the PE-backed veterinary clinic model in the US
Invezz: Your website says IVP offers a better way of veterinary ownership than ownership by private equity funds. What are the pitfalls of PE funds increasingly owning veterinary practices in the US, and how does your model differ from theirs?
We firmly believe there is no right or wrong choice between a PE-backed purchase of a veterinary clinic versus other models, such as Inspire Veterinary Partners.
With that said, we have also seen the majority of clinic consolidation over the last decade, coming from private equity-backed firms, present challenges and nuances that we encourage sellers to understand.
First, there is the short two-to-five-year time frame most PE investors have before they want to ‘exit’ any investment.
This can often mean short-sighted business goals, painful financial burdens driven down into clinic operations, and sometimes, a lack of understanding of how veterinary medicine is negatively impacted by these funds wanting to ‘roll up’ revenue quickly and get out of an investment.
Inspire’s founders and leaders include veterinary professionals, and we select clinics for purchase with the desire to maintain those clinics for the long term and make growth plans accordingly.
We aim to provide a new path to multi-unit clinic consolidation driven by investing in our teams and, crucially, providing a path to shared equity.
How IVP is allowing the employees to have a share in the clinic’s equity
That brings up another component which we believe in deeply.
Typically, private equity does not provide shared equity in the business for the entire workforce.
A standard PE-backed clinic purchase might include the promise of deferred equity for the seller in two to five years, but it seldom includes equity or shared ownership for the rest of the workforce.
Additionally, any equity offerings are tied to fund exits and are not recurring, meaning the equity offered is a one-time event and only for those at ‘the top of the pyramid’.
Inspire aims to deploy an Employee Stock Option Plan, or ESOP, which provides annual grants to our employees, allowing them to have the potential for wealth building and share in the success of the entire company, not just one clinic.
This plan will be offered to the vast majority of our employees, not just the doctors or owners.
Since our vision is long-term and our main goal is to enhance and protect the veterinary profession, we’ve also infused our passion for our workforce into the development of one of the most comprehensive total compensation packages, including pay, time off, and other benefits, of any company in our sector.
As we deploy these tools and continue to make investments in our clinics, we believe in Inspire’s differentiated model and feel it is superior to other ‘roll up’ models for those sellers who care about their legacy and for teams who truly love the profession in which they work.
On IVP’s growth strategy through acquisition of clinics
Invezz: Your clinic portfolio currently has 14 clinics. Run us through your growth strategy through acquisitions. How many clinics do you aim to acquire over the next five years? Also, how have you positively impacted the clinics you have acquired so far?
We have a robust business development process and a multi-disciplined team that contributes to acquisition decisions, and we have annualised goals related to M&A business.
These goals are driven by growth targets, business milestones, and other factors rather than simply by clinic numbers.
This, too, relates to the previous discussion about Inspire versus a PE model.
We are conscious of the longer path of growth for IVP and want to make today’s expansion decision in alignment with understanding how that affects us many tomorrows from now.
Put simply, we will grow, and we have demonstrated we know how to scale the company, but growing at the right rate, versus simply being ‘exit-minded’ in our growth targets, is important for us.
All of that said, over the next five years, the business will look very different.
We aim to grow the business several times today’s current size by individual unit acquisitions, clinic expansions, new types of clinic acquisitions, such as speciality and emergency, acquisitions of multi-unit practices and, in the not-too-distant future, expansion into new business verticals beyond clinic ownership and operations.
For those clinics currently within Inspire’s workgroup, we’ve invested deeply into aforementioned areas such as compensation, health and well-being, and integrated systems or tools across our entire portfolio.
We’ve provided our clinics with greater purchasing power than single-unit hospitals often have, and we’ve built recognition models, bonus and incentive plans, and our experienced leadership team provides coaching, development, and side-by-side support for our teams in each clinic.
Today’s Inspire is built on integrated systems and tools that allow us to operate 14 clinics, but was built with foresight in mind so we can scale to 140 or 1400 clinics by leveraging these very same systems.
All of this has resulted in many of our clinics achieving impressive year-over-year growth and other noteworthy growth targets, with our entire portfolio showing strong momentum and enterprise-wide KPIs trending very favourably.
Aim to complete new acquisitions by 2025-end- 2026; plan to achieve cash-flow break even
Invezz: What are your near-term goals for revenue growth and profitability, and how do you plan to achieve them?
Our daily operations are focused on both the growth of our existing business, or vertical growth, as well as horizontal growth through continued acquisitions as we scale appropriately.
We know the internal growth and external expansion pro forma figures required to achieve our next financial milestones, and we continue to leverage learnings from the successful integrations of our current 14 clinics as we execute processes by which we grow and enhance the efficiency of the current portfolio, so both of these engines are operating in parallel fashion each day.
By year-end 2025, we aim to complete new acquisitions and carry that momentum into 2026, during which we plan to achieve cash-flow break-even via the aforementioned vertical and horizontal growth.
On the $10 mn convertible preferred stock transaction
Invezz: How do you expect the $10 million convertible preferred stock transaction to strengthen Inspire Veterinary Partners’ balance sheet and support its long-term growth strategy?
Inspire’s most recent funding comes after our first two years of being a public company, and we’ve leveraged the many things we’ve learned in those two years.
As a micro-cap public company, it’s just as important for us to say ‘no’ to the wrong kinds of capital offerings as it is to say ‘yes’ to what works for us as we continue to be disciplined about the kinds of funding we take.
We believe this latest raise not only provides us the ability to execute our growth strategy but also to work with the right funding partners and aim to avoid the kinds of structures that would bring harm to our capitalization and balance sheet.
We’ve also executed this funding with a clearly forecasted alignment of capital raise timing planned alongside scheduled accretive events like acquisitions, so that we can continue to show our shareholders how funds coming into the company can be directly contributed toward growth in the business.
Prefer to raise capital on ‘as-needed’ basis than taking on a ‘war chest’ of cash
Invezz: Some shareholders may see this agreement as a sign of financial strain, especially with the possibility of dilution. How do you respond to concerns that Inspire is relying too heavily on equity-linked financing instead of strengthening operations and cash flow?
We will do both – grow the existing business and raise capital responsibly to expand our overall portfolio.
Both disciplines are crucial, and we are very aware of scaling our business so that dilution from raises has an ever-diminishing impact on the value we provide investors.
As mentioned, our team is laser-focused on the growth of the existing business, and we believe recent quarterly results show that we have begun to see the results of our intense work over the past four to eight quarters.
It’s also important to understand that we have been aware of our size from the beginning and, as a small cap company, we made the decision early on to raise on an as-needed basis versus taking on a ‘war chest’ of cash, which might have come with onerous deal terms for the company and, in some cases, could lead to faulty decisions as pressure increases to put that cash into play.
The opposite of that approach, doing smaller raises as we have growth events like acquisitions, is, in our minds, a safer approach and allows us to raise at better valuations as the company matures.
ESOPs, mental health offerings to tackle veterinary labour shortage and attrition
Invezz: Labour shortages are a recurring challenge in veterinary medicine. How is Inspire addressing staff recruitment, retention, and mental health in its clinics?
There is no question that attracting and retaining talent within the veterinary workforce is the number one challenge for every veterinary operator.
I can’t be emphatic enough about how our approach to solving this challenge is at the core of our Company.
The benefits, compensation, and equity structures Inspire has deployed and designed were all created to make us an employer of choice.
As we look to the near future aim of having our ESOP in place, vesting over successive years of employment for our team members, Inspire aims to directly enhance our ability to retain professionals longer than our competitors and leverage that advantage as a benefit for financial growth, doctor-to-client relationships, and long-term stability.
We’ve also added mental health offerings to our benefits plans, and we pay 100% of premiums for our eligible team members’ health coverage, to just mention a couple more ways we take care of our teams.
All of this is to say we haven’t tried to be iterative in our approach to retaining great talent –we aim to be transformational by giving ownership and best-in-class benefits and compensation to our teams.
Can IVP keep costs low amid rising pet care expenses?
Invezz: Rising pet ownership since the pandemic has boosted demand, but affordability for pet care remains a concern. How do you see the industry addressing the tension between rising costs and access to care?
As an industry, and certainly for Inspire, the cost of care is a focus as providers of veterinary care seek to ensure pet owners can maintain high health standards for their pets.
While we’ve seen some price increases across the entire industry, speaking for Inspire, we’ve taken a very careful approach to pricing with the aim of trying to minimise the impact on our clients.
Our world is more expensive than it was one, two, and five years ago, and this reality is felt by every business, so we must be realistic about that in
addition to the fact that owning a pet and properly caring for it comes as a responsibility and with a cost.
All of that said, we continue to deploy efficiencies aimed at keeping our costs low so we can ensure pet care is accessible and each of our teams leverages close relationships with their clients so that the best joint decision can be made with the best care for the pet in mind.
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