Even before private equity began moving into the world of dogs and cats, corporations were active acquirers of veterinary businesses. And the biggest corporate buyer of them all is Mars, which has been scooping up vet clinics for 30 years.

From candy to pets

Mars was founded in 1911 when Frank C. Mars began making and selling buttercream candy from his kitchen in Tacoma. Now based in McLean, Va., Mars has $50 billion in sales while its namesake family has an estimated fortune of $117 billion, ranking as the second richest in the U.S., according to Forbes. The Mars family is famously private and has avoided publicity, Fortune reported in a 1967 story. Siblings Jacqueline, 84, and John, 88, co-own Mars but don’t manage it, according to Business Insider.

Mars’ relationship with pet owners has accelerated dramatically in recent years, but the company has long had ties to the pet industry. In 1935 it acquired the U.K. maker of Chappie canned dog food, renamed Pedigree Petfoods in 1957. In the decades that followed, Mars added to its pet food portfolio by acquiring Whiskas cat food and Kal Kan dog food and, more recently, launched Sheba cat food and Cesar for small dogs. Then, in 2001, Mars paid $730 million for a majority of France’s Royal Canin and scooped up Nutro Products in 2007. 

The candy conglomerate’s first investment in vet clinics came in 1994, when Mars acquired a stake in Banfield Pet Hospital. In 2007, it bought the rest of Banfield. Some of Mars’ most significant investments occurred from 2015 to 2018. In 2015 it bought BluePearl, then one of the biggest chains of emergency care clinics for companion animals. It expanded into Sweden with its $2.4 billion buy of AniCura in 2018 and moved into the U.K. with its deal for Linnaeus, also that year. But its biggest impact on the vet industry came in 2017 when Mars paid $9.1 billion to take VCA private, a deal that added 800 animal hospitals and clinics to its roster. The VCA acquisition remains the second-biggest sale in the pet clinic space, behind Boehringer Ingelheim’s $12.5 billion buy of Merial, the animal health arm of Sanofi, which closed in January 2017.

Mars showed “other people in finance the value that could be found in vet medicine,” said one vet who worked at VCA and then for a private equity backed pet clinic. Veterinary care is a cash business that produces a recurring revenue stream that is attractive to private equity firms and corporate investors, said Patrick Callaghan, an attorney with law firm Nixon Peabody, whose practice focuses on representing health care, dental, and veterinary clients on transactional and regulatory matters. Focusing on pet health has helped Mars, which in 1994 produced annual sales of $13 billion and was bleeding money, Fortune reported at the time. Since entering the vet space, revenue has soared 284%.

Pet care is one of Mars’ business segments, which also includes snacking, food, and nutrition, as well as global services. At one point, Mars had operations in 80 countries and 135 factories in 68 countries, although it’s unclear if that is still true. Mars’ executive leadership team, led by CEO Poul Weihrauch, manages the company’s day-to-day operations.

Pet care goes global

The importance of vet services to Mars’ overall business is reflected in the number of people it employs. Of the roughly 150,000 individuals who work there, nearly half are at Mars Veterinary Health, the unit that buys and operates vet clinics and hospitals. The unit is led by Doug Drew, a former investment banker and ex-CEO of ThinkPets, who spent seven years running VCA hospital operations in the U.S. before becoming president of Mars Veterinary Health North America in 2019. 

"As a family-owned business with nearly 90 years of experience and heritage caring for pets, we work to positively impact pets and the people who care for them,” Drew said in a statement. "When we acquire a veterinary business, our model is to grow and develop it, to positively contribute to the veterinary sector, the profession, and the pet owner experience over generations.” 

Mars Veterinary Health operates a network of about 3,000 veterinary clinics and hospitals that are located around the world including Brazil, Poland, the U.K., Hong Kong, as well as the United States. It employs about 70,000 associates, including more than 12,000 veterinarians and roughly 22,000 paraprofessionals. Nearly 7,000 doctors work at VCA, one of the largest vet chains in the world, which operates 1,000 community hospitals in the U.S., Canada, and Japan. More than 3,600 veterinarians work at Banfield Pet Hospital, which has over 1,000 pet hospitals in the U.S. and Puerto Rico. VCA and Banfield are catching up to NVA, the biggest private equity backed vet chain, which has more than 1,100 vet clinics. (NVA is majority owned by JAB Consumer Partners, the PE arm of JAB Holdings.) 

Mars is also a big presence in PetSmart stores thanks to a partnership, founded in 1994, that allows Banfield to open clinics inside the pet retailer’s stores. More than half of Banfield’s 1,000 general vet hospitals operate inside PetSmart locations, where doctors provide general services like routine vaccinations, microchipping, and dental and surgical care.  

Right now there are about 35,000 to 40,000 veterinary clinics in the U.S., Fortune has reported, citing KPMG data. Veterinarians themselves in 2023 owned a majority, or 51%, of the pet clinic marketplace, according to a KPMG report. Private equity firms held a 29% stake, while corporate owners had 19%, the report said. KPMG estimates that corporations own about 6,600 vet clinics. Nearly half, or 45%, are owned by Mars, which has 3,000 vet clinics. “Mars Petcare dominates corporate clinic ownership as insight into pet and pet parent data is seen as the new currency to drive more targeted interventions,” KPMG said in the report.

Private equity firms are also big buyers of vet clinics, but they didn’t really begin acquiring practices until the Covid-19 pandemic of 2020. Buyout shops have used a roll-up strategy, in which they buy several smaller companies in the same sector and consolidate them into one company and then sell—a tactic that has proved very successful in sectors like insurance and health care services.  

Mars uses both a roll-up and de novo—launching a brand-new clinic—strategy with its vet clinic assets, according to John Volk, a senior consultant with Brakke Consulting. “​​By and large, [Banfield] are de novo practices. Most or all of them are in PetSmart stores,” Volk said. BluePearl and VCA are classic roll-up strategies, he said. The number of VCA clinics has jumped 25% under Mars, while BluePearl has nearly doubled to about 100 hospitals. 

PE firms typically own a company for about four to seven years; they will often start looking to sell in year three of ownership. While hold periods have stretched, many vet clinics acquired in 2020 may go up for sale this year, PE sources said.

Unlike private equity, Mars retains many of the vet clinics it has acquired. Mars has made roughly 30 acquisitions since the 1990s; many are for vet clinics and hospitals outside the U.S., according to Dealogic and Fortune data. Mars appears to have offloaded assets just twice since 2015. In 2019, Mars sold VetFamily, a platform that provides services like marketing and purchasing to its member clinics in Europe, to Fidelio Capital. Earlier this year, Veterinary Pharmaceutical Solutions said it bought Diamond Animal Health, a contract manufacturer that focuses on the animal health sector, from Mars. (Granite Creek Capital Partners owns Veterinary Pharmaceutical Solutions.) 

Mars is not interested in growth for growth’s sake, a person close to the company said. Company shareholders have set short- and long-term objectives, both financial and nontraditional metrics like greenhouse gas reduction, they said. “We want to grow in the right way: growing the business responsibly and making a real difference to people, pets, and the planet. We are not about financial engineering to maximize profit, then sell again,” Drew said in a statement.

After clinching four acquisitions in 2023 and five the year before, Mars has yet to buy any vet clinics this year. (The candy company is in talks to acquire Cerba Vet and Antagene from Cerba HealthCare in France.) Many think that will change. Mergers in all industries have slowed since a record 2021, when nearly all sectors posted a surge in dealmaking. The sale of vet clinics is expected to ramp up later in 2024 mainly because private equity has to sell. MedVet, which is backed by Goldman Sachs and PE firm SkyKnight Capital, is up for sale, according to PE Hub. "We will see a lot of things trading in the next 18 months because [private equity] is out of time on their hold period, and they don't want to refinance in this market,” said Cathy Bedrick, a partner and financial due diligence service network leader at KPMG.