Buyers vs. Sellers Market

Like most determinants of value/price, supply and demand also play a significant role.  In the most recent past, there have been limited practices for sale, thus driving up the valuations that investors were willing to make.  However, as has happened in the United Kingdom and has currently started in the United States, the number of practices available for sale is rising sharply; mostly stimulated by the market flurry of recent years.  In the past, this was a seller’s market as Veterinarians had more control over their value.  But as the availability of practices increase in the marketplace, there is a shifting bound to happen; it becomes a buyer’s market and valuations shift to the downside. But there is another factor in this buyer versus sellers’ market, and that’s regional competition.  Many large investors are taking a hub-and-spoke model approach to their future investments.  Focus has been put on large referral centres and 24-hour emergency hospitals.  Paying a premium for these practices can cause a depreciation in the valuation of surrounding hospitals.  By focusing on a few of the large supporting general practices, they eventual reach a critical mass, a point when they do not need to purchase any more within that region to ensure their success.  This organically and subsequently reduces the interest of other competing investors who do not want their revenues directed to their competitions’ 24-hour emergency hospital.  The result, an eventual drop in appraisal value, and possibly to a point of being unsellable.  The future is a system of larger, more-efficient, consolidated practices.  Predicting these events can be difficult, but using the United Kingdom model, it is not hard to imagine this scenario in the near future.