Pet Care Market Tailwinds Remain Strong, Private Equity Add-Ons Bolster M&A Activity
Continued appetite from private equity groups for Pet sector exposure and a building pipeline of transactions for strategic acquirers have set the stage for a vibrant Pet sector Merger and Acquisition (M&A) market in 2025. M&A activity in the Pet sector declined from 128 to 96 transactions announced or completed in 2024.
The Food, Products, and Vet & Health segments were primary contributors to the slowdown in dealmaking in 2024 while participants in the Services segment displayed a healthy appetite for acquisitions, seeing a 45% year-over-year (YOY) increase in deal flow.
High fragmentation in the Pet Grooming & Boarding space has made consolidation and valuation multiple arbitrage opportunities attractive as players jockey to gain market share and achieve economies of scale.
Despite a dip in Vet & Health deals, the segment remained active, with 40 transactions (41.7% of total sector volume) in 2024. Sponsor-backed companies announced or completed 37 acquisitions in 2024, a 60.9% YOY increase. An aging inventory of private equity portfolio companies and limited partner (LP) demand for returns will likely spur increased M&A in 2025 as fund managers bring high quality assets to market.
Pet Humanization Grows, Focus Shifts from Freeze-Dried to Human-Grade Food
Pet owners have continued to humanize their animal companions. Dog owners almost unanimously (90%) think of their dog as a child or part of the family, according to Pet Food Processing and BSM Aperture. Pet owners have increasingly looked to pet food products that feature premium attributes, such as human-grade and superfood ingredients. The rise of frozen raw and fresh food formats has contested the assent in popularity of the freeze-dried format that was in part driven by the success of Stella & Chewy’s.
Advertising spend has been critical for fresh pet food players to compete with legacy companies in freeze-dried and kibble, such as Mars and Nestle (SWX:NESN). Moreover, human-grade pet foods feature higher ticket prices and often necessitate robust marketing to share the products’ value proposition. Dog food sales have increased 41.8% between 2020 and 2024 while volume decreased 3% over the same period, partially attributable to the consumption shift to these more expensive pet food options, according to Circana data.
In the Pet Food segment, Capstone expects participants to increasingly pursue acquisitions to expand into fresh and frozen raw products. Anecdotally, some segment participants have indicated if they transact in the near term, it will be in fresh, human-grade food. Recently, Pure Treats, a producer of pet treats, foods, and toppers, acquired Bar W Foods (October, undisclosed). The transaction includes the target’s human-grade meat processing and freeze-drying facility.
Consumer Preferences for Science-Backed Products and Supplements Increases
Human health and wellness trends have continued to spread into pet care, providing substantial tailwinds for pet supplements and wellness products. The majority (85%) of global pet owners equate the importance of proper nutrition and supplements for themselves with their pets, according to a report from Archer Daniels Midland (NYSE:ADM). This disposition resulted in the Pet Supplement market experiencing a near 20% compound annual growth rate (CAGR) in sales between 2018 and 2023. Consumers have continued to shift from reactionary pet health interventions to proactive and preventative management of their pet’s health.
Science-backed solutions are expected to capture significant market share in this high-growth segment of the Pet sector. Notably, 97% of consumers say the primary health benefit claimed on packaging influences purchasing decisions while 40% of dog owners look for science-supported health claims to validate product efficacy. A growing number of private equity investors have developed investment theses around “science-backed” pet products with proven efficacy.
Evolving consumer demands will dictate the pace of growth in this relatively new segment. Pet Supplement participants with proprietary formulations and science- or vet-backed products will likely continue to draw robust acquisition interest and garner premium valuations.
Services Remain a Focus for Sector Participants, Strong Consumer Demand Expected to Persist
The Pet Services segment has remained a hotbed for sector growth. U.S. Pet Services revenue rose 1.3% YOY to $14.7 billion in 2024, led by the Pet Boarding subsegment ($5.7 billion), according to IBISWorld. Small privately-owned businesses in this segment have continued to perform well during the post-COVID sector normalization. Premium pet services, such as luxury pet hotels and special care treatments, are expected to drive continued growth. Moreover, this segment has contributed to a growing share of sector M&A.
The above is an excerpt from Capstone Partners’ March 2025 Pet M&A Coverage Report. For over 20 years, Capstone Partners has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. For more information, visit www.capstonepartners.com.
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