Veterinary services provider CVS (CVSG:AIM) bounds 6p higher to 674.5p on Monday as investors applaud another financially and strategically attractive acquisition from the deal-hungry group. The takeover of small animal vet surgeries business Highcroft Pet Care brings CVS its first significant presence in the Bristol area and boosts its burgeoning referrals business.

Click here to drill down into the finer details of the latest acquisition from CVS, which has a modest 12% share of the UK small animal veterinary market and a negligible share of the equine and large animal veterinary market. This implies major scope for consolidation-driven growth in a market that boasts defensive qualities; pet owners will always shell out cash for treatments because they view pets like family members.

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Cash-generative CVS has paid a total enterprise value of £11.5 million (including £4.1 million of net debt) for high growth Highcroft. The acquisition not only boosts CVS' footprint in the Bristol area, a large market where it currently has few surgeries, it also strengthens the geographic footprint of a referrals business.

Providing higher margin specialist services for both owned and third party vet practices, referrals is a key area of focus for CVS, which opened a major multi-disciplinary referral centre in Hampshire earlier this month, following on from the acquisition of the Dovecote referral centre in Castle Donington in July.

Significantly, Highcroft's rapid recent growth has been driven by the development of its own new referral business. The takeover lifts the number of CVS referral centres to five, implying the AIM-listed company only needs a further 3-to-4 centres to obtain the national coverage that would bring even greater profit potential.

Web chart - CVS - Oct 2015

Shares in Diss-headquartered CVS, which also operates diagnostic laboratories, pet crematoria and an online pet medicines dispensary, have had a strong run, with positive momentum maintained following news of another record year for sales and profits in all divisions.

Issue Date: 26 Oct 2015