Private-Credit Exposure to Veterinary Rollups Shows Growing Dispersion; VSOs Under Increasing Pressure

Relevant Item:
Link to Octus’ BDC Database
 

Octus has identified 15 veterinary companies operating across five business models held by business development companies, or BDCs. Companies analyzed in this report are listed in the table below:
 

As of the third quarter of 2025, BDCs hold $3.1billion in principal lent to veterinarian companies. The following is a list of veterinarian companies with the largest BDC lender by reported fair value.
 

The report distinguishes between five business models: Veterinary service organizations, veterinary partnership organizations, hybrid, management services organizations and specialty with fair value pricing varying across business models, indicative of differences in fundamental performance across business models.

Veterinary service organizations, or VSOs, have seen the most variability of performance, with an average fair value of 97.4% of par but ranging from 88% to 101.2% as of Sept. 30, 2025, reflecting the relative structural weakness of the VSO model, where veterinarians are converted into salaried employees with limited economic participation, reducing alignment and increasing turnover.

Veterinary partnership organizations, or VPOs, have performed meaningfully better, with an average fair value of par. This stronger performance is consistent with the VPO structure, in which veterinarians retain ownership stakes.

Hybrid operators that combine both VSO and VPO models continue to trade close to par, with valuations tightly clustered between 99% and 100%.

Management services organization, or MSO, operates at approximately 100.5% of fair value. Clinics are veterinarian-owned and veterinarians retain direct equity and operational control.

The specialty veterinary platform is marked at fair value at 100.8% of par. This business model benefits from higher barriers to entry, referral-driven demand and more defensible clinical niches.
 

U.S. Veterinary Industry – Macro Overview

From 2017 to 2022, private equity firms are estimated to have invested about $45 billion in U.S. veterinary sector deals with an emphasis on rollup deals. One characteristic cited is customers that tend to pay out of pocket, rather than through insurers leading to favorable cash flow.

Corporate ownership now accounts for 25% to 50% of general veterinary practices and approximately 75% of specialty and emergency clinics. As of the first quarter of 2025, multiples based upon EBITDA for private veterinary practices tended to linger in the mid- to high single digits. However, specialists and exotic animal clinics obtained significantly higher multiples.

As discussed in other recent reports, part of the private equity playbook is to take advantage of multiple spreads between single practices and multipractice platforms. As a recent example of potential multiple expansion, equity in Western Veterinary Partners, a hybrid rollup owned by Tyree & D’Angelo Partners, was recently added to a single-name continuation vehicle, which, according to Secondaries Investor, was valued at a “high-teens EBITDA multiple.”

Inflation dynamics in the pet sector have become increasingly uneven. Pet food and treats inflation have now largely stabilized, with year-over-year inflation around zero as of April 2025. In contrast, veterinary and grooming services continue to experience strong inflation, rising 4.6% year over year. Since 2019, pet services prices have risen 42%, compared with only 22% for pet food and treats. This reflects the labor-intensive nature of veterinary care, persistent staff shortages, and rising wage and benefit costs, all of which continue to push clinics to raise prices.

The chart below tracks the annual inflation rates for pet food and treats versus pet services from 2019 through 2025.
 

U.S. Veterinary Industry Pressure

Falling visit volumes, rising price sensitivity, elevated labor costs and the expansion of online pharmacies are structurally changing how pet owners access care. While urgent and sick visits have remained relatively stable, preventive, wellness and product-driven visits are declining, as cost-conscious pet owners shift routine care and medication purchases away from clinics.

Veterinary Labor Shortage

A 2024 American Association of Veterinary Medical Colleges (AAVMC) study finds that by 2032, only about 76% of U.S. veterinarian demand will be met, leaving a significant shortage of practicing veterinarians. This gap is driven by rising demand for veterinary services, retirements, and workforce dynamics like part-time work preferences and burnout.

According to the American Veterinary Medical Association, 55% of participants indicated a preference for working in private practice compared to 12% preferring corporate practice. Those working in corporate practices reported feeling more pressure than those in private practice to generate revenue and see more clients per shift.

Shortages are exacerbated by employee exits following certain consolidation. We believe this has led to some of the weakness in the VSO segment when business owners are not properly incentivized, as discussed below.

Pet Owners Are Becoming More Cost-Conscious

Cost is increasingly a barrier to care. A Gallup-linked survey found that 52% of U.S. pet owners have skipped or declined veterinary care due to cost concerns, with 37% declining recommended services after a visit and 15% not visiting a clinic at all. Sick and urgent visits have held up better than routine or wellness care, indicating that pet owners prioritize essential treatment while deferring preventive services.

Pet Medication Purchases Are Gradually Moving Online

Online platforms are becoming a core channel for pet medications and veterinary-related spending. Pet owners increasingly expect the fast checkout, home delivery, free shipping and subscription-based refills. As a result, many owners are shifting routine medication purchases away from veterinary clinics toward online retailers such as Chewy, Petco, PetMeds and WalmartPetRx, which are widely perceived to offer lower prices, greater convenience and automatic refill programs.

Online sales accounted for approximately 18% of all U.S. pet medication purchases in 2021 and are projected to rise to about 30% by 2026. Flea, tick and heartworm preventatives are among the categories seeing the fastest migration to e-commerce.

Beyond e-commerce, digital veterinary care is also gaining traction. Platforms such as Vetster, Dutch and Dial A Vet allow pet owners to obtain virtual consultations, prescriptions and follow-up care without visiting a physical clinic, further reducing dependence on traditional in-office visits for routine needs.

Clinic Visit Volumes Are Falling

From 2023 to 2024, pet services inflation cooled to about 4% to 6%, but visit growth did not recover and instead continued to decline, reflecting structural rather than cyclical weakness. The pandemic-era surge in pet ownership during 2020-2021 pulled forward a significant amount of demand, followed by post-COVID normalization in the end market. At the same time, permanently higher veterinary prices have made owners more cost-conscious and selective about ongoing care.

Vetsource and VHMA data show that veterinary visits declined 2.3% in 2024 compared with 2023, and active patient counts fell 1.9%. At the same time, the average time between visits has increased sharply, rising from about 73 days in 2020 to 2021 to more than 112 days by mid-2024, a 48% increase.

The composition of visits is also shifting. “Sick” visits have remained relatively stable, but wellness visits are down nearly 3% and product-only visits have fallen roughly 7%, signaling weakening demand for preventive care and in-clinic pharmacy purchases. These declines reflect two parallel dynamics: some pet owners are shifting routine medication purchases to lower-cost online pharmacies, while others are skipping or deferring care altogether due to cost pressures.

The chart below shows the average veterinary clinic revenue growth and average veterinary clinic visit growth:

Insurance Is Growing but Still Under-Penetrated

Pet insurance is one of the few offsets to rising prices and could represent an opportunity for the industry. At the end of 2024, approximately 7 million pets in North America were insured, up 12.2% from the prior year and growing at roughly 20% annually since 2020.

An American Veterinary Medical Association-funded study found that dog owners with pet insurance spend about $211 more per year on veterinary services than uninsured owners.

While pet insurance adoption is increasing and helps offset large veterinary bills, it can delay revenue receipt for practices since many insurers reimburse claims only after the owner pays upfront, and reimbursement times often range from about five to 30 days or more, depending on provider and claim complexity.

Business Model Definition

1) Veterinary Service Organizations (VSO)

VSO is a corporate or private equity-backed platform that owns and operates veterinary clinics, controlling hiring, pricing, capital structure and clinical protocols.

It often acquires independent practices, consolidating them under a single holding company. Veterinarians are W-2 employees with production-based pay. Former clinic owners sell 100% of their practices outright. According to the American Animal Hospital Association, consolidators typically require sellers to continue working for years after closing to ensure continuity of care and revenue. Veterinarians may receive earnouts for two-to-three years but retain no long-term equity.

This model shows the highest credit volatility because retention and culture become fragile once selling doctors lose ownership.

2) Veterinary Partnership Organizations (VPO)/JV

In a VPO, private equity owns a majority stake in the platform, but veterinarians retain 20% to 45% ownership in their individual hospital and often roll equity into the platform.

This structure dramatically improves retention and has fewer restructurings.

3) Hybrid

Hybrid models combine both VSO and VPO structures, allowing veterinary businesses to operate through either full buyouts or joint-venture partnerships. This flexible deal structure lets practice owners choose between selling outright or retaining equity while partnering with a larger platform.

4) Management Services Organization (MSO)

An MSO in veterinary medicine is a nonclinical business entity often owned by private equity. This business structure enables corporate control of veterinary practices while complying with state laws requiring clinics to be owned by licensed veterinarians. Under this structure, the veterinarian owns a professional entity that holds the medical records, client relationships and the legal right to provide care, while the MSO owns or controls nearly everything else needed to run the business – for instance the real estate or leases, equipment, and IT systems.

The MSO and the veterinarian’s practice are bound by a long-term management services agreement (often 10 to 20 years) in exchange for management fees and economic control.

5) Specialty

Specialty rollups focus on aggregating practices in specific sub-disciplines such as radiology, emergency or referral services. These platforms often provide specialist veterinarians with 10% to 40% equity and influence over clinical protocols, reflecting the referral-driven and complex nature of these services.

Fair Value Performance by Segment

VSO has exhibited the widest valuation dispersion in secondary markets, with first lien fair values ranging from 88% to 101.2% of par. Unlike VPO or hybrid structures that offer practice-level ownership and retention incentives, VSOs must compete on wages and benefits to attract and retain doctors, making them more exposed to labor inflation and staffing shortages.

Within the six VSO credits analyzed, Pathway Vet Alliance completed a distressed debt exchange in March 2025, which extended maturities by one year to 2028 and increased company liquidity.
 

Pathway Vet Alliance, doing business as Thrive Pet Healthcare, is a private equity-backed veterinary consolidator owned by TSG Consumer Partners. In March 2025, the company completed a large-scale liability management exercise. The transaction exchanged Thrive’s existing debt into a new superpriority revolver; first lien, first-out; first-lien, second-out; and second lien structure, extending all maturities to June 2028 and providing incremental liquidity.

According to S&P Global Ratings, the company has been pressured by rising labor costs, staffing shortages and declining patient volumes. This pressure is particularly acute for the VSO model, where veterinarians are typically W-2 employees rather than equity partners, limiting alignment and increasing turnover risk.

According to sources, the additional liquidity would support the company’s continued cash burn as it implements initiatives such as hiring and retaining doctors and targeting underperforming locations.
 

As of Sept. 30, Ares Capital Corp. reduced the fair value of its PetVet Care Centers holdings to 88% of par, down two points from the prior quarter. According to Octus, “Most business development company lenders to PetVet that have reported third-quarter results have written down the fair value as a percent of par by about 1 to 2 points. However, Ares Capital Corp.’s 88 cent mark is the lowest across BDC lenders.”

The company was acquired by KKR in 2017 and it remained one of the most significant underperformers in the third quarter. KKR attributed the markdowns to an “unfavorable business outlook,” reflecting ongoing pressure on operating performance and growth expectations.

PetVet Care Centers operates more than 450 veterinary hospitals nationwide, making it one of the largest veterinary platforms in the United States. Its large, labor-intensive footprint increases exposure to wage inflation, staffing shortages and softer visit volumes, which have pressured margins and contributed to recent valuation declines.

Snoopy Bidco, dba United Veterinary Care, operates over 100 general, specialty and emergency veterinary hospitals across the United States and is backed by private equity sponsor Nordic Capital. The company’s first lien term loan has seen its interest profile shift between all-cash pay and partial PIK over recent quarters. In the most recent period, the loan moved from all-cash pay to a partial-PIK structure and is currently marked at 95.7% of par.

While none of the reporting BDCs have disclosed the specific drivers behind the markdown, we believe that it likely reflects ongoing industry headwinds, including persistent labor shortages and softer patient visit volumes across veterinary clinics.
 

The VPO segment has performed relatively well, with the two credits analyzed showing fair values at par. Veterinarians retain meaningful equity at the practice level while rolling ownership into the platform. This model incentivizes doctors to drive organic growth and profitability while remaining invested in the long-term value of the broader network.
 

Hybrid models are generally valued close to par, but BDCs have flagged some weakness in certain holdings. Ares reduced the fair value of its subordinated loans to Amerivet Partners to 83% of par in the third quarter of 2025. The loans were marked at par in the third quarter of 2024.

Hybrid models offer owners flexible deal structures that allow them to choose between full buyouts and joint venture partnerships. It is unclear whether any weakness at Amerivet is related to practices in which owners received full buyouts or cash-only compensation.
 

Mission Pet Health, fka Southern Veterinary Partners, was marked at nearly par as of Sept. 30, with fair value down 0.3 points quarter over quarter.

Mission Pet Health repriced its $2.893 billion first lien term loan due 2031 in July and issued a new fungible incremental first lien term loan due 2031 at SOFR+250 bps with a 25-bps step-down.

In 2024, Silver Lake and Shore Capital Partners merged Southern Veterinary Partners and Midwest Veterinary Partners into what is now Mission Pet Health, creating a platform valued at $8.6 billion with approximately $580 million of EBITDA and over 750 locations. The scale of the new entity positions it to compete with larger industry players such as Mars, which operates more than 3,000 veterinary clinics worldwide.

AmeriVet Veterinary Partners’ first lien and subordinated loan fair value as of par both declined during the third quarter. AmeriVet is backed by private equity partner AEA Investors. The company acquires and partners with independent veterinary clinics using both full buyouts and joint venture structure.

AmeriVet Veterinary Partners announced on Nov. 20 that it has acquired 14 new veterinary practices from Northeast Veterinary Partners in a recent buyout, bringing the total number of clinics in AmeriVet’s network to 186, with the newly added clinics located throughout California, Maine, Massachusetts, New Hampshire and Vermont. Unfortunately, we do not have information about the valuation of the recent Northeast Veterinary Partners acquisition.

Equity in Western Veterinary Partners, owned by Tyree & D’Angelo Partners, was transferred to a single-name continuation vehicle with HarbourVest and Ares also funding the transaction. According to Secondaries Investor, the business was valued at an enterprise value of $2 billion, representing a “high teens EBITDA multiple.”

Within the MSO segment, VetnCare is marked above par at 100.5% of fair value this quarter, reflecting strong credit performance and lender confidence. VetnCare operates a veterinarian-owned platform, where partner doctors retain clinical autonomy and meaningful equity, aligning incentives between operators and capital providers.
 

Specialty services remain one of the strongest areas of the veterinary credit market, with Vets Choice Radiology trading above par at 100.8% of fair value. Specialty platforms benefit from high barriers to entry, including the need for board-certified clinicians, specialized equipment and entrenched referral relationships with general practices.
 

Vets Choice Radiology operates a mobile veterinary radiology and diagnostic imaging network, providing advanced imaging services such as ultrasound and CT interpretation to clinics that outsource these functions, generating recurring, referral-driven revenue with limited exposure to consumer demand volatility.

Appendix

The 10 largest BDC holders within the veterinary sector are shown in the table below:
 

Recent veterinary industry transactions, compiled from public sources, are shown in the chart below:
 

Detailed capital structure information and historical pricing data for the credits discussed in this report are reviewed below, and are sorted in alphabetical order.

Alliance Animal Health
Sector: VPO
Sponsors: L Catterton, LightBay Capital
Alliance Animal Health partners with veterinarians to help them expand and manage their practices while allowing them to retain clinical autonomy. The company was recorded as AAH Topco in most BDC fillings.
 

 

Amerivet Partners Management
Sector: Hybrid
Sponsor: AEA Investor
AmeriVet Partners operates a network of over 200 animal hospitals.
 

 

CareVet
Sector: VSO
Sponsor: Compass Group Equity Partners
CareVet is a U.S. veterinary practice management platform operating over 200 hospitals nationwide.
 

Heartland Veterinary Partners
Sector: Hybrid
Sponsor: Gryphon Investors
Heartland Veterinary Partners operates over 300 hospitals primarily across the Midwest and Southern United States.
 

Pathway Vet Alliance
Sector: VSO
Sponsor: TSG Consumer Partners
Pathway Vet Alliance operates a nationwide network of over 400 general, specialty and emergency veterinary hospitals.
 

PetVet Care
Sector: VSO
Sponsor: KKR
PetVet Care Centers is a U.S. veterinary services network that operates over 450 general, specialty and emergency animal hospitals.
 

Snoopy Bidco
Sector: VSO
Sponsor: Nordic Capital
Snoopy Bidco, dba United Veterinary Care, operates over 100 general, specialty and emergency hospitals across the United States.
 

VetEvolve
Sector: Hybrid
Sponsor: Varsity Healthcare Partners
VetEvolve is a U.S. practice management platform that provides general practice services.
 

VetPartners Group
Sector: VSO
Sponsor: BC Partners
VetPartners Group is a leading U.K. veterinary services organization.
 

VetCor
Sector: VSO
Sponsors: Oak Hill Capital Partners, Harvest Partners, Cressey & Co.
VetCor Group Holdings is a major North American veterinary services network operating over 900 practices across the United States and Canada.
 

 

VetnCare MSO
Sector: MSO
Sponsor: Great Point Partners
VetnCare MSO is a Northern California-based network of American Animal Hospital Association-accredited veterinary hospitals that partners with veterinarians to support practice growth.
 

Vet’s Choice Radiology
Sector: Specialty
Sponsor: Corbel Capital Partners
Vets Choice Radiology is a U.S. veterinary teleradiology services provider offering 24/7 interpretations of X-rays, CT, MRI and ultrasound studies.
 

VPP Intermediate Holding
Sector: VPO
Sponsor: Audax Private Equity
VPP Intermediate Holdings LLC is the holding company for VetPractice Partners, or VPP.
 

Western Veterinary Partners
Sector: Hybrid
Sponsor: Tyree & D’Angelo Partners
Western Veterinary Partners operates over 325 hospitals across 39 states in the United States.