Vet sector represents most of M&As in the pet industry

A new market update from consumer investment banking group Capstone Partners concluded that the pet industry saw 49 merger-and-acquisition (M&A) operations in the first half of the year.

Veterinary services accounted for 24% of all deals, with 12 in total. The group highlighted that private equity firms are capitalizing on veterinary service sector trends.

However, M&As have “moderated” as by the same period in 2022, there were a total of 72. Signs of moderation in the rate of M&As could be due to rising interest rates, Capstone suggests.

Interest in premium pet food

The report highlights that private equity firms are targeting pet companies that have established premium pet food brands to gain access to the growing premium segment.

Major consumer packaged goods (CPG) companies such as Nestlé or Mars are “leading” the pursuit in the pet sector, the report suggests. One of the main deals the report highlighted was Post Holding’s purchase of some pet food brands from J.M. Smucker.

Tom Elliott, Managing Director of Capstone, says M&A activity has been partly spurred by the “imbalance between the supply and demand of contract manufacturing for pet food.”

Elliott gave 2 examples to support this idea, namely Hill’s acquisition of Red Collar manufacturing assets to support its Science Diet Brand’s growth. In addition, there was the merger of Natural Balance with Canidae, he says. Both of these business deals were “motivated by access to manufacturing.” 

“Healthy” forecast

Capstone’s report points out that investors in the pet industry will “likely look to be aggressive in their acquisition strategies” so they can “take advantage of long-term sector growth prospects.

Based on the data collected, the firm expects M&A activity in the pet industry “to remain healthy,” motivated by numerous factors such as consumers increasing total spending habits on pets, higher e-commerce sales and new products in the market.