- Have low interest rates lead to higher valuations for vet practices? Real estate prices have gone up in all major cities, has this been reflected in vet practice valuations?
Our valuations are based on profitability before interest, so no, interest does not influence our valuations. Practices have become busier and more profitable – this has led to an increase in value from a buyer’s perspective; obviously lower interest rates make it easier to borrow money, so this may be one of the factors that has contributed to a lot of younger vets buying into practices over the last 10 months or so. I think also though, because practices have become busier, younger vets are now seeing this as a suitable career path and are more willing to commit to private practice. Also, I guess with time, if the market is full of buyers then this would also drive the value of practices up due to supply and demand, however I have not seen this yet.
Also worth noting is that, in spite of low interest rates, banks are nervous to lend! So, in high value practices, often a single buyer does not seem to be able to raise the finance – banks are treating the vet industry like every other industry and are being cautious – this does not help sales in an environment where high profits often result in a value above which a bank will loan.
- The vet industry has seen an increase in spending over the last year, during COVID-19. With job keeper due to end, do you feel it will have an impact on the fortunes of vet practices?
Only time will tell. We run real-time live analytics in practices and we will be monitoring client spend, visits and average invoice value over about 200 full time vet equivalents across AU. We will detect early if this is the case and start strategising. Sudden loss of income and decreased spend is a possible scenario we cannot ignore. However, the optimist in me thinks that the main driver of more work for vets is the ‘work from home’ trend, which is not going to go away in a hurry, so hopefully vets will remain busy.