• 29.06.2018
• Sven Jan Arndt
• no comments

1. Current trend

The spectacular takeover of Germany's largest veterinary chain, Anicura, by Mars Petcare caused a stir at the beginning of June (we reported on it: https://doc4pets.de/anicura-schliesst-sich-mars-petcare-an/Now a new "chain" – Vetsana?

And already the next financial investors are waiting in the wings, promising the selling and acquiring veterinarians the moon. Currently, for example, Vetsana GmbH (a nice name – it sounds very reputable and like a veterinarian) from Munich is getting started. They are committed for the long term (10-15 years) and are all entrepreneurs. We noticed them because they are using quite a lot of marketing in the Grüner Heinrich area and at... Wir-sind-Tierarzt.de act as an advertising partner.

Unlike the big chains, they are friendly and approachable. Every young veterinarian has the freedom to develop their skills. The selling veterinarian knows their practice is in good hands. Etc. etc.

They always prefer to have a majority when they take over a practice – quote: „ Yes, typically we acquire a majority stake in the practice. We very much like it when the managing veterinarians take a significant stake in their own practice as partners. This is not mandatory, but it is an option. The size of the stake is flexible within this framework.“

2. Vetsana – a new concept?

Let's take a look behind this new construct, which aims to do everything better than the other chains:

a) There are no veterinarians among the investors – how can economies of scale, which one supposedly wants to leverage, be utilized? „"And a consortium naturally has further advantages, for example in purchasing, training and the exchange of know-how."

b) Legally, this construct, like Evidensia and Anicura, stands on very shaky, national ground. The state veterinary associations largely stipulate who must be involved in a practice and by what majority. The Westphalia State Veterinary Association specifies this in great detail:

㤠28 Veterinary association in the legal form of a legal entity under private law

(1) Veterinarians are permitted to operate a solo practice or a joint practice in the legal form of a private legal entity. The following conditions must be met to operate a company in the form of a private legal entity: 1. The company must be managed responsibly by a veterinarian, 2. The majority of managing directors must be veterinarians., 3. The majority of the company shares and voting rights must be held by veterinarians, or, based on company agreement provisions, the powers for resolutions relating to the professional code of conduct of the Westphalia-Lippe Chamber of Veterinarians, the veterinary professional law, and the rights and obligations of veterinarians arising from applicable law must be irrevocably transferred to a body in which licensed veterinarians hold the majority of the voting rights. 4. Every veterinarian working in the company must have adequate professional liability insurance; in the case of partnerships with limited professional liability, priority must be given to Section 8 Paragraph 4 of the Law on Partnerships of Members of the Liberal Professions.“

It's actually quite remarkable that the state veterinary associations establish professional codes of conduct but don't enforce them. Why not, one wonders? Fear of EU law? As an ordinary citizen, one has to wonder what the point of laws and regulations is then!

c) Which veterinary practices has Vetsana already taken over!?

d) What kind of return does such a private investor expect when making such a long-term commitment? Those who, by their own admission, only want to exit after 10-15 years typically demand a substantial multiple of their group's revenue. In other words, the veterinarians being acquired must, of course, dramatically increase their revenue during this period to make a proper exit possible. We're talking about revenue increases of 25-301,000 per year – otherwise, in our opinion, it doesn't make sense for such a "private investor." From our perspective, the problematic aspect is the prospect for the young veterinarian who has poured their heart and soul into their practice for 10 years, only managed to acquire a maximum of 491,000 per year, and is now being sold to another investor (e.g., Mars Petcare) without having any say in the matter. And what will happen to them there? Will they really be able to continue developing their practice as they wish?

3. A look behind the scenes

Let's take a deeper look behind the scenes., Which is something the editors of Wir-sind-Tierarzt.de don't seem to have done very carefully. While they're usually so proud of their critical reporting, they seem to quickly forget their critical distance when "the money's rolling in"—which, to be fair, they did acknowledge in the end. „Disclosure: VetSana is a sponsoring partner of wir-sind-tierarzt.de for the summer months of 2018. This article was created as part of this advertising partnership – you can read more about this form of collaboration here.“

According to the commercial register, the shareholders of Vetsana GmbH are Mr. Ulrich Biffar (Switzerland) with 63.11 TP3T, Pelecanus GmbH with 26.761 TP3T, and Mr. Florian Arndt with 7.8881 TP3T and Mr. Uwe Bühler with 2.2521 TP3T. Mr. Felix Hauser is behind Pelecanus GmbH.

Mr. Biffar, Mr. Hauser, and Mr. Arndt all hold leading positions (managing directors) at Lamont Capital GmbH – also located in Munich. According to their own statements, they use this company to invest in highly profitable businesses. „"Lamont Capital is a Munich-based company that focuses on advising on the acquisition and ongoing support of medium-sized companies. The investments focus on majority stakes in companies in German-speaking countries with an enterprise value between €10 million and €75 million that are sustainable and above average in terms of profitability."“

Now, of course, the question immediately arises – how many weddings can one dance at? Not just a little bit, but professionally? So that the dance partner also enjoys it and doesn't end up with a bunch of bruised feet after the dance. 😉

Mr. Ulrich Biffar was also the head of the German branch of the financial investor Bain Capital. Mr. Arndt and Mr. Hauser also worked at Bain Capital. Bain Capital is known for its rather aggressive approach to its investments.

„"Bain Capital is accused of exploiting various companies and causing their subsequent bankruptcy:

GS Technologies, a steel mill in Kansas City, had been operating since 1888. In 1993, Bain acquired a majority stake, but barely ten years later the company was bankrupt. According to a report by the US television network MSNBC, 750 people lost their jobs at that time. Bain, on the other hand, profited from the deal: the company reportedly earned twelve million dollars, having initially invested only eight million dollars. In addition, Bain apparently pocketed at least 4.5 million dollars in consulting fees. ^[4][5]

In 1992, Bain Capital acquired American Pad & Paper. By 1999, two of the company's factories had closed, 385 jobs were lost, and the company was $392 million in debt. In 2000, the company filed for bankruptcy. ^[6] The Boston Globe reported that Bain earned US$100 million from Ampad, on an investment of US$5 million, including several tens of millions in management fees. ^[7]

Bain Capital and Goldman Sachs acquired Dade International in 1994 for approximately US$450 million. Around 900 jobs were eliminated or outsourced. Over the next few years, another 1,000 workers were laid off, and the company's debt quadrupled. The company declared bankruptcy in 2002. ^[8][9]

In 1997, Bain Capital bought LIVE Entertainment for US$1,104,400. Subsequently, one in four of the 166 employees were laid off. ^[10] Bain Capital made a profit of US$578 million through the companies Stage Stores, American Pad & Paper, GS Industries, Dade, and Details; all five companies went bankrupt shortly afterwards. ^[11]“

4. Outlook

A cynic might now think something sinister about the sentences from the aforementioned – let's call it an "advertorial" from Wir-sind-Tierarzt.de:

„ VetSana It was founded by German entrepreneurs led by Florian Arndt and myself. We invest our own money. There is no investment fund or other form of venture capital behind it, nor is there any other company from the veterinary medicine sector involved.
We are private investors with a long-term investment horizon. We see this as a 10- to 15-year project. Only then will our commitment and investment pay off. We want to build a long-term and sustainable partnership with our veterinarians to achieve this.“

It's great that there will finally be a "good veterinary chain"...