dvm360 exclusive interview: Behind the Mars-VCA merger

In an announcement that's taken the veterinary industry by surprise and generated no shortage of speculation and opinion, Mars Petcare, owner of the Banfield, BluePearl and Pet Partners veterinary practice groups, says it will acquire VCA's nearly 800 hospitals in a deal that's expected to be finalized in the third quarter of this year. The acquisition also includes Antech Diagnostics, Sound Technologies and Camp Bow Wow, all part of the VCA company.

This week Bob Antin, CEO of VCA, and Poul Weihrauch, president of Mars Petcare, talked with dvm360 in an exclusive interview about what this move means for the two companies and for the profession at large-and whether corporate practice is the downfall or the salvation of veterinary medicine.

dvm360: There are those who say corporate veterinary practice is bad for pet owners and for the profession. What's your response?

Bob Antin, CEO of VCAAntin: First of all, every single independent practice-and there are probably 24,000-is really a company. They respond to employees like a company and run the business in order to have enough capital to reinvest in it.

Thirty years ago, when I first went into animal hospitals after being in human healthcare, I was astonished to find that the most modern piece of technology was typically older than me. It was either a secondhand x-ray machine or an unsophisticated chemistry box that you really wouldn't have much confidence in. The technology existed, but the capital to purchase it did not. The veterinarian had to decide if they would spend the money on their family vacation or on a piece of equipment. Human nature is, you worry about your family.

What VCA did, and what the Mars family is doing, is pushing the envelope in technology. CAT scans, MRI, linear accelerators, scopes, ultrasounds and digital radiography are very common. Many doctors who are independent-and this is the overwhelming majority-now have the confidence to make those investments. And part of that confidence is that they have an exit strategy; corporations with access to capital have validated what they've done and provided them an opportunity to get out.

All that technology came about because capital suddenly came into the veterinary profession. So if anything it's just the opposite-corporations have given the profession freedom to invest and to enjoy the benefits of technology and training.

dvm360: You say VCA will continue to operate independently, but in what ways will ideas be shared across Mars' veterinary divisions?

Poul Weihrauch, president of Mars Petcare, and his dog TwixieWeihrauch: From a Banfield point of view, we will of course get together with Bob to find out things we can learn from each other. This is a unique opportunity with two great companies coming together to learn from each other, whether that involves IT systems that run our hospitals or best practices for management. We will spend time learning from each other and collaborate to the benefit of the quality of veterinary care and of our many employees.

Antin: I personally have gone to the Banfield pet health summits from day one and I've worked with every successive Banfield CEO. Our companies collaborate currently on a lot of ideas-and you can't stop ideas. We serve Banfield's diagnostic reference needs, at least some of them, and we also do a ton of field continuing education with [VCA Chief Medical Officer] Dr. Todd Tams. Many of those attendees are Banfield doctors as well. The wonderful part of our industry is that collaboration exists. It's our foundation.

VCA stats

VCA is made up of four divisions:

VCA Animal Hospitals

• 4,000-plus veterinarians

• 20,000-plus employees

• $1.7 billion in revenue in 2015

• 796 animal hospitals (712 in the U.S.; 84 in Canada)

Antech Diagnostics

• 1,500 employees

• $394 million in revenue in 2015

• 60 laboratories

• 17,000 animal hospitals serviced

• 13 million requisitions processed per year

Sound Technologies

• Manufacturer of digital radiography and ultrasonography equipment

• 150 employees

• 7,500 animal hospitals serviced

Camp Bow Wow

• Provider of doggie daycare, boarding, training and in-home pet care

• 250 employees

• 137 camps

Source: VCA fact sheet

dvm360: Bob, what will your role be in this transition?

Antin: I say it with a bright smile: I am going to continue to be the CEO of VCA and run VCA in its discrete and separate way. I expect to do much the same as I've always done. I don't see anything different.

Weihrauch: This is exactly what Mars wants to see happening. We've admired VCA for years, and if you look at their track record, it's unrivaled. In the end you don't buy companies-you buy people; you buy passion. The veterinary industry is unique in that it's almost a calling. The way VCA has been run-its hospitals, Antech, Sound-is really unique, and every single person we've met has shared that with us. Again, you don't buy companies; you buy great people.

dvm360: So VCA, which has been publicly traded, will now “go private” as a part of Mars. What does that mean for current shareholders?

Antin: Current shareholders of VCA will have to approve the transaction through a vote, but shareholder feedback has been very, very positive. So we expect just to go through the process, which is expected to happen by third quarter of this year. At that point, the Mars family/corporation will buy all of the stock of VCA. And the VCA shareholders will turn around and say, “Thank you.”

dvm360: Is it true that Mars is attempting to offset a decline in the packaged foods and sugary snacks industry by investing in a market with better future growth potential?

Weihrauch: It couldn't be further from the truth. The purpose of Mars Petcare is a better world for pets. We don't make decisions in pet care because of what is happening elsewhere. We have a fundamental belief that the two most important ingredients in a healthy life for a cat or a dog is nutrition and providing the best quality veterinary care to as many pets as possible. That's a philosophy that is independent of whatever growth rate you might find in pet food or in chocolate or in chewing gum. We love what we do. We want to make a better life for pets.

dvm360: Even though pet spending overall has been growing, spending on veterinary services has been struggling. Do the corporate wizards at Mars see ways to buck that trend?

Weihrauch: We have enjoyed better growth rates than the average [at Mars-owned veterinary practices]. We don't see a declining trend; we see more animals in our hospitals. We make good efforts to try to make it attractive to visit our hospitals and get the right care. We don't see the same trend as you reference here.

dvm360: Considering that Antech Diagnostics is part of VCA, will the laboratory arrangement at any Mars-owned veterinary practices change with this acquisition?

Weihrauch: We have hospitals that use Antech today and we have hospitals that use other labs. It's not exclusive. It's very much dependent on geography, to be honest, and what is available nearby a hospital.

dvm360: So there will be no full-scale change to using Antech services exclusively across those units?

Weihrauch: We will never force our vets to use anything specifically. They have the right to put the interest of the pet first in all aspects of the decisions they make.

Mars stats

Mars Inc. is made of up five divisions:

• Mars Petcare

• Mars Wrigley Confectionary

• Mars Food

• Symbioscience

• Mars Drinks

Veterinary services businesses

• Banfield Pet Hospital

• BluePearl Specialty and Emergency Pet Hospital

• Pet Partners

Pet food brands

• Pedigree

• Royal Canin

• Eukanuba

• Iams

• Nutro

• Whiskas

• Cesar

• Dreamies

• Sheba

• Waltham

Other pet-related brands

• Wisdom Panel

• Whistle

Source: Mars fact sheet

dvm360: The corporate veterinary world has been very active lately. Will this trend continue, do you think, and is there a place for the independently owned private practice to coexist in an increasingly corporate marketplace?

Antin: The overwhelming majority of practices are still independent. And VCA's strategy is only to buy from the independents. There's so much activity because there are so many independent practices out there that are growing. One of their desires is at some point to be rewarded for that growth. I continue to see many people open up practices. I see that continuing, and I see independent practices continue to be the overwhelming majority for years and years to come.

dvm360: Both Banfield and VCA were criticized in a recent Bloomberg article on corporate veterinary medicine. Do either of you have any response to that piece?

Antin: The doctor is the focal point of everything we do. To think that a doctor goes into a room and works so hard and often cares for a pet more than the pet owners do ... to think that they would do some of the things that were insinuated in that article is an insult to veterinarians. This is one profession that has a built-in quality assurance program, and that's the integrity of the veterinarians. I have a lot more faith in veterinarians than that article suggested. I think veterinarians are a model for most professionals. They have integrity, they work hard, they invest their lives, and on top of it they do it every day with a smile.

Weihrauch: The Bloomberg article was a tremendous disappointment, and we strongly disagree with all the allegations it contained. To echo Bob, this is not what I recognize. We have incredibly hardworking people that get out of bed in the morning because they love their jobs; they love pets. I didn't see any of that reflected. This is the one profession where passion, dedication, love and care are at the forefront. I saw none of that. How it is that a paper of that standing can put out an article like that? Very disappointing.

dvm360: Is it possible for a veterinarian graduating with $200,000 to $300,000 in student debt to ever pay off their student debt as an associate in a corporate practice? Some say they have to be a practice owner to realize the ROI in order to pay off student debt at some point in their lives.

Antin: We have over 4,000 doctors who work for us, and the turnover rate in VCA is not very high. I would say that by their own actions, many of them are living good lives. I will admit that student debt, whether for veterinarians, for dentists, or anybody else including college kids, is tough, but I would disagree. I think there are great opportunities for financial balance in corporate practice.

And there are also great opportunities for life balance. Veterinarians in our practices don't have to worry about those other things. This is why some people take their independent practices and make voluntary decisions to sell. As an aside, in many cases we provide those associates with the opportunity to become financial partners with us. We have quite a few partnerships like this with doctors around the country.

Weihrauch: Also imagine the career opportunities for veterinarians now. If they want to try another career the opportunity is there. If veterinarians would like to try an opportunity in nutritional science, we have more than 1,000 veterinarians employed doing that in Mars already. If they want to work in the world's biggest foundational research institute for companion animals in the U.K., that career opportunity is there. If they want to do a residency there are even more opportunities. VCA is the single biggest opportunity for residency programs, and now that is even bigger.

One of the things we want to achieve with this is to be the employer of choice for veterinarians. Mars has spent a lot of time on employment opportunities and on engaging with our employees. We want to be seen as the employer of choice in this area and provide great opportunities for veterinarians. If they have to relocate from part of the country to another, the opportunities they'll find in other employment within the same house has just been doubled.

dvm360: Any parting thoughts?

Weihrauch: This is a great opportunity to make sure that the quality of care is at the forefront and veterinarians' ability to practice great medicine every day is being maximized. We come together because of a love for pets, as Bob would say and, as we would say, a better world for pets.