KBS - Pet Sector - Market Insight

MARKET INSIGHT – PET SECTOR

M&A ACTIVITY CONTINUES TO RISE WITHIN THE PET INDUSTRY In recent years, the pet sector has, figuratively speaking, grown from a small pup into the large entity it is today, and there are no signs of it stopping. The global pet care market exceeded $150bn annually for the first time in 2024 and is forecast to surpass $200bn by 2030. This follows the industry having achieved a historic 10% compound annual growth rate (CAGR) between 2018 and 2023. Pet food is responsible for a large chunk of the industry’s success, resulting in a spur of M&A activity. With strong market increases and forecasts, including a significant CAGR, pet nutrition companies, as well those focused on pet accessories and pet care, are an ideal target for acquirers and investors alike.

CURRENT LANDSCAPE Several key trends have shaped the UK M&A market in the pet sector in recent years.

Premium Products: Following an increase in customer-driven demand for specialised pet food products, many deals have been motivated by acquiring companies who presently produce such products or have the capabilities to do so. Private Equity: PE firms account for a lot of M&A activity in the pet sector. In an evolving market, many established companies are offering a strong market position and growth potential. Cost Synergies: Firms are looking to acquisitions for significant cost savings presented through economies of scale, streamlined operations and shared resources with synergistic operators, helping to enhance profitability. ACQUISITION SYNERGIES Operational Synergies: Several manufacturers combining their operations can lead to enhanced efficiency, reduced duplication of resources and improved service delivery. Financial Synergies: The right acquisition, or sale, can improve access to capital, optimise the complex cost structures that pet sector manufacturers and retailers typically navigate, and enhance financial performance through better cashflow management. Knowledge and Expertise: Merging with or acquiring manufacturers with specialised expertise can accelerate innovation and enhance the acquirer’s capabilities in new operational practices.

The global pet care market exceeded $150bn annually for the first time in 2024 and is forecast to surpass $200bn by 2030.

MOTIVATIONS OF TRADE ACQUIRERS AND CONSOLIDATORS IN THE PET SECTOR

In recent years, trade consolidators’ interest in acquiring pet care manufacturing and distribution companies has been driven by the need to achieve scale, diversify expertise and strengthen their market position in a highly competitive and continually evolving industry.

As consumer demands for sustainable and innovative food solutions grow, businesses are increasingly seeking partners that can deliver integrated manufacturing, packaging and distribution services.

The predictability of recurring revenue from long-term contracts with major retailers and pet food distributors is another major attraction. This financial stability is especially appealing to private equity-backed consolidators seeking reliable returns. Additionally, acquiring established pet care manufacturers or distributors allows consolidators to quickly incorporate advanced capabilities, such as automation, sustainable processing technologies and efficient supply chain solutions, which are crucial for remaining competitive in a fast-evolving sector. Ultimately, these acquisitions enable consolidators to solidify their presence in a lucrative market, drive innovation and adapt to the shifting preferences and regulatory requirements in the pet sector. + ACCESS TO SPECIALISED EXPERTISE AND TECHNOLOGY Acquired businesses often bring specialised knowledge in areas like sustainable manufacturing practices, advanced pet food safety technologies, or efficient logistics systems. Trade consolidators use these acquisitions to enhance their capabilities and address high-demand areas within the sector. + RECURRING REVENUE STREAMS The predictability offered by contracts with major retailers or pet service companies is highly attractive. These steady revenue streams appeal particularly to private equity-backed consolidators seeking reliable returns on investment within a rapidly growing sector. + SUSTAINABILITY AND INNOVATION DEMAND Increasing consumer and regulatory pressure for sustainability has created demand for eco-friendly practices and innovative pet food solutions. Acquisitions allow consolidators to rapidly adopt new technologies and processes, positioning themselves competitively in the market. + SYNERGIES AND COST EFFICIENCIES Consolidators achieve economies of scale by integrating operational elements such as logistics networks, procurement and production facilities across multiple acquisitions. This integration reduces costs and improves profitability, making businesses more competitive in a price-sensitive market. This approach enables consolidators to build robust, scalable operations capable of meeting the evolving demands of the pet sector.

WHAT TYPES OF BUSINESSES ARE STRATEGIC ACQUIRERS PURSUING?

In the UK pet sector, strategic acquirers are targeting companies that can enhance their market presence, diversify offerings and deliver specialised expertise. Ideal acquisition targets often exhibit niche capabilities, strong customer relationships, impressive growth metrics and alignment with consumer and regulatory trends in sustainability and innovation.

+ NICHE PROVIDERS AND SPECIALISED EXPERTISE

+ HIGH-GROWTH AND HIGH-MARGIN OPERATIONS

Acquirers seek businesses offering highly specialised products or services that bring unique capabilities to their portfolio. Companies with expertise in areas such as organic foods or sustainable packaging are particularly attractive.

Firms with a track record of rapid growth, or those operating in high-demand segments such as healthier products or premium goods, are prime targets. Strategic buyers value strong revenue growth and healthy profit margins.

+ HOLDERS OF PROPRIETARY TECH OR PROCESSES

+ STRONG CUSTOMER RETENTION

Businesses with proprietary technologies or innovative production methods — such as efficient food waste management systems or exclusive recipes — offer competitive advantages. Intellectual property that enhances production efficiency or product differentiation is highly valued.

Companies with loyal, long-standing client bases and strong retention rates are prized for their predictable revenue and potential for upselling value-added services, such as premium delivery or customised packaging.

+ ACCESS TO NEW MARKETS OR REGIONS

Strategic buyers are also targeting firms with a presence in underserved regions or emerging market segments. Companies offering an established foothold in growing regions or demographics, such as younger customers seeking health-conscious products for their pets, are particularly appealing. By focusing on these types of acquisitions, strategic acquirers in the pet sector aim to build robust, future-ready businesses capable of addressing evolving market demands.

Having previously touched on the UK having surpassed the 50% and 60% marks for households owning at least one pet, annual sales of pet food products in the UK stands at £5.75billion.

KEY ACQUIRERS AND INVESTORS

Key acquirers and investors driving mergers and acquisitions in the pet sector include the following companies:

KEY STRATEGIC INTERESTS The pet sector is attracting significant interest from private equity (PE) and investment buyers. This heightened attention is driven by the sector’s rapid growth potential and ongoing market consolidation efforts. STRATEGIC INTERESTS OF PRIVATE EQUITY AND INVESTMENT BUYERS IN THE PET SECTOR ESG Considerations: There is a growing emphasis on environmental, social and governance criteria among investors, leading to an interest in companies that align with sustainable practices and renewable energy goals. Value Creation: Private equity firms often pursue operational improvements and strategic repositioning of acquired companies to create value before exiting through resale or public listings. Long-Term Growth Potential: Many investment buyers are focused on sectors with growth potential, and the evolving landscape of consumers’ preferences towards certain products due to dietary, lifestyle and medical necessity provides an opportunity to capitalise on the rapidly growing preference for ‘premium’ products amongst certain consumer groups.

PRIVATE EQUITY CONNECTIONS

PE investments into pet sector companies are becoming a highly significant part of the industry.

We maintain active relationships with many leading private equity houses that either hold or are actively seeking acquisitions in the pet sector space, and which also receive funds from institutional investors.

SECTOR DEAL ACTIVITY LAW PRINT AND PACK ACQUIRED BY SCG PACKAGING Stockport-based Law Print works with a global network of accredited packaging manufacturers and suppliers, with pet food packaging one of its specialist areas of expertise. Law Print was sold, in a deal overseen by KBS Corporate Finance, to a company listed on the Stock Exchange of Thailand which offered significant synergies and further global expansion. KBS DEAL

VET’S KITCHEN ACQUIRED BY PETS CHOICE

Pets Choice Ltd acquired Vet’s Kitchen, Pets’ Kitchen Ltd’s premium pet food brand, which specialises in dry dog and cat food. As a supplier to its partners in grocery and pet speciality sectors, Pets Choice plans to grow its share of the premium and advanced nutrition sectors.

JR PET PRODUCTS ACQUIRED BY ALPHAPET VENTURES

KBS DEAL

Premium UK dog treat brand JR Pet Products, based in Wales and which offers a wide range of natural dog chews and treats with a strong focus on quality raw materials and products, was acquired by AlphaPet Ventures, a well-established digital brand platform for premium pet food in Europe.

NATURAL INSTINCT ACQUIRED BY THE NUTRIMENT COMPANY

Adding a UK company to its European pet nutrition portfolio, Swedish-based pet food manufacturer The Nutriment Company expanded its geographic reach. Family-owned Natural Instinct operates in the production of raw, frozen dog food and natural treats.

PETMEDIX ACQUIRED BY ZOETIS

PetMedix, a Cambridge-based leader in discovering species-specific therapeutic antibodies for pets, was acquired by Zoetis, the world’s number one animal health company.

PHARMPET ACQUIRED BY PHARMACY2U

Pharmacy2U, the UK’s largest digital pharmacy, acquired PharmPet, a leading veterinary online pharmacy which is a highly regarded and ethical provider of online pet medicines.

RANDLAB ACQUIRED BY ANIMALCARE GROUP

Animalcare Group acquired Australian-based equine veterinary business Randlab for an enterprise value of £62.2m, in a deal the York-based acquirer described as “an excellent fit with our growth strategy” and “complementary to our product portfolio”.

INVETX ACQUIRED BY DECHRA PHARMACEUTICALS

Invetx, a pioneer in protein-based therapeutics for animal health, was acquired by Dechra, a global specialist veterinary pharmaceuticals business based in Cheshire, for a total consideration of up to $520m.

THUNDERBROOK EQUESTRIAN ACQUIRED BY PAVO

Pavo, the horse feed brand of ForFarmers, expanded its market position with the acquisition of Thunderbrook, a £3m turnover Suffolk-based company whose product range fits seamless with its acquirer’s.

18 BELOW ACQUIRED BY PURE TREATS

Aiming to meet the rising demand for high-quality RAW freeze-dried pet treats, food and toppers, Canadian-based Pure Treats acquired Bar W Foods and 18 Below, a human-grade meat processing and freeze-drying facility based in Texas.

WHITEBRIDGE PET BRANDS SOLD FOR $1.45BILLION

General Mills made its fifth acquisition in six years, acquiring Whitebridge Pet Brands - North America, a premium cat feeding and pet treating business. With this transaction, the company plans to drive sustainable, profitable growth and top-tier shareholder returns over the long term.

The value of the dog food market was the UK’s highest, totalling

£1.84billion, with cat food amounting to £1.43billion.

PRIVATE EQUITY ACTIVITY

PET MATE ACQUIRED BY ETHOS PARTNERS

KBS DEAL

Pet Mate Ltd, a prominent Surrey-based designer, manufacturer and distributor of innovative pet products, was acquired in a multi-million pound deal by a private investment office, London-based Ethos Partners. The company’s products are highly regarded by cat, dog and fish owners throughout Europe and the United States. Ethos will allow the business to continue its strategic growth, providing a platform to rapidly expand operations.

KIN VET COMMUNITY FORMED BY PERWYN CAPITAL

Perwyn, a prominent European private equity investor based in London, successfully completed the acquisition of several UK veterinary clinics, marking the formation of Kin Vet Community, a dynamic entity in the veterinary landscape.

JOLLYES ACQUIRED BY TDR CAPITAL

TDR Capital acquired Jollyes, which operates 100 stores across the UK, offering a range of own-brand speciality products and services for pets.

CHANELLE PHARMA ACQUIRED BY EXPONENT

Exponent, a London-based PE house which operates across Europe, invested into Chanelle, the largest indigenous pharma company in Ireland and a global leader in animal health, which has an established product portfolio and exciting pipeline focused on companion animals.

PETVISOR ACQUIRED BY APAX PARTNERS

Petvisor, a best-in-class veterinary and pet services business management and client engagement software platform, received more than $100m in new investment led by Apax Digital Funds.

MARKET INSIGHT Having previously touched on the UK having surpassed the 50% and 60% marks for households owning at least one pet, annual sales of pet food products in the UK stands at £5.75billion. The rest of Europe also consists of pet-loving countries - 50% of European households own at least one pet, contributing to annual sales of €29.2billion for pet food products and a volume of 9.9 million tonnes (Statista 2024). The value of the dog food market was the UK’s highest, totalling £1.84billion, with cat food amounting to £1.43billion. Imports to the UK amount to £1.1billion annually, while exports stand at £296million, shipping most of its products across the European continent. • HUMAN-GRADE PRODUCTS: More demand for products made with natural ingredients that closely resemble ‘people food’. • PRIVATE EQUITY: PE firms are heavily investing in the sector at present, with particularly strong investor appetite for established brands and scalable operations. • SUSTAINABILITY DRIVES: Increasing demand for eco-friendly production, reduced food waste and sustainable sourcing. • WHO LET THE DOGS OUT: A significant increase in the population, as well as the humanisation of dogs by their owners. • APPS AND SUBSCRIPTIONS: Younger generations are more adept at using online services and value subscription-based brands/products. These trends not only reflect changing consumer priorities but also highlight areas where M&A activity and investment are likely to grow, positioning the sector for dynamic development in the coming years. The industry is poised for growth driven by the following factors: • HEALTHY PRODUCTS: Growing appetite for plant-based, organic and health-oriented foods.

Imports to the UK amount to £1.1billion annually, while exports stand at £296million.