The Deal Hound 1H 2026

• It’s long been said the pet services and product sector is “recession proof.” In 2025, we learned that’s not always so as deals eased, and consumers felt the pinch of inflation and tariffs.
• Advances in veterinary care, including on-site diagnostics and telehealth visits, are driving vet clinic profits as they continue to attract investor interest.
• There is room to run for producers who deliver innovative pet products, foods, and supplements that meet an evolving customer demand for functionality and value in a rising-cost environment.

As faithful as Fido, pet owners are known for spending on their furry family through good times and bad. But the old adage that the “pet sector is recession proof” is being challenged as the money gets tight and “affordability” becomes the word of the day. It will be up to service providers and product suppliers to stand out, demonstrate value, and understand and meet customer needs. But people are still spending on pets. It’s estimated the 94 million U.S. pet owners shelled out $157 billion in 2025, up from $152 billion the prior year, including $68 billion in food and treats. More than half of global households include a pet. But we believe the businesses that will continue to capture consumer cash, and attract investors, in choppy economic times will be those that demonstrate consumer value and nurture dependable, repeatable business. 1, 2

Inflation has been a stubborn problem in the U.S. and abroad since the COVID-19 supply chain snarls (remember Asian port closings and freight backups at California’s Long Beach ports), while consumers for the large part kept spending.
But if trusted surveys are an indication, and they probably are, consumers are getting a bit tired with both consumer sentiment and financial expectations stumbling in the past year. Consumer spending is expected to slow in 2026,
hampered by sticky inflation and a softening labor market. Suddenly, a $4,500 “Pup Clubhouse Dog-Bone-Themed Agility Playset” and a $170 automated cat feeder with AI-powered, 2k HD video night vision, 5G wi-fi enabled, 2-way audio, and a daily one-minute video compilation of your cat’s activities (subscription required) might fall from the “needs” to the “wants” bin. 3,4,5,6,7,8

Around the world, consumers are planning to cut back on discretionary spending, and that likely means Rufus and Fluffy will need to tighten their collars along with the rest of the family. This may not mean fewer veterinarian checkups or smaller meals, but there are signs that if pet parents aren’t entirely cutting back on toys and playsets, they’re looking for something that provides the value of physical and cognitive stimulation. 9,10,11

We don’t know what 2026 holds, but across pet services and goods, consumers who have traditionally demonstrated pricing resiliency may shift gears if the economy slows. 12

Having a pet at home can be rewarding, but those rewards come at a cost. The average lifetime cost of a pet dog is estimated at $35,000 and for a cat it’s $32,000, with food and treats making up most of spend. Pet owners feel those costs. More than half of pet owners say they are increasingly concerned that tariffs and inflation will add to those costs in the coming year. It’s estimated vet bills will rise more than 10% in 2026, and a quarter of pet owners worry they won’t be able to afford all the things their pets will need. 13

Real costs could mean real change. One in four pet owners say they have switched to a more affordable food brand, but two thirds say if they switch, they are looking for something of similar quality. For producers and marketers, it may be a challenge to simultaneously demonstrate and promote value and quality. 13

Mergers and acquisition activity in the pet sector has been subdued in recent years following the work-from-home pet boom of the 2020 pandemic, but acquisitions continue and opportunities still abound for established, solid businesses. The difference is in the level of buyer caution as investors seek clearly differentiated brands and products while still uncertain of supply chain and tariff issues. Consolidation of the winners, rather than expansion of the untested, may be a key trend to watch. Buyers appear to be looking for established enterprises with a clearly defined, documented path to consistent and stable growth. 14,15

The deal days aren’t over, but they need to make sense. Pet owners appear to be looking for durable products that are safe and sustainable while delivering engaging play. For example, SportPet Designs in 2025 acquired Mammoth Pet Products, a company that meets consumer demands with long-lasting rope tug and chew toys. For American manufacturers, especially those who depend on ingredients or materials from outside the U.S., internationally, investors are looking for documented evidence production and margins can continue amid global trade spats and geopolitical tensions without reduced margins or depending on cost-sensitive customers to pick up the tab through higher prices. 11,16,17

There is still plenty of money out there for M&A in the pet sector – U.S. private equity firms are hanging on to an estimated $880 billion in undeployed funds – but that’s not “dumb money”. Investors and strategic buyers are increasingly focused on brands and services that are well established, have shown resilient top-line and bottom-line performance, and are more insulated from any decline in consumer spending. Deals have slowed and valuations have moderated as buyers have become increasingly selective. 18,19

While pet owners may economize on food, snacks, and toys, it doesn’t mean they don’t care for their adopted family members’ health. Veterinary care and today’s modern diagnostic and pharmaceutical tools are better than ever, and we believe pet parents will continue to seek the best care available. Innovations include wearables that transmit health data to veterinarians, variations of human cancer treatments for pets, stem cell therapies, and telemedicine access to medical professionals. That continues to make the veterinary services and medical care sector attractive to investors. Diagnostics in particular remain an area of interest, driven by innovation and investment from giant players including IDEXX Laboratories, Mars (yes, the candy bar people), and Zoetis. Mars has been an interesting player in the pet food and services market, including a 2025 $450 million inits dry pet food plant in Ohio and its ownership of the ubiquitous chain of VCA Animal Hospitals. IDEXX, a developer of veterinary care technology, diagnostics, and practice management software, for its part saw a 75% stock price surge over 2025. 21,22,23,24

The veterinary diagnostics market, by one estimate, is expected to see a compound annual growth rate (CAGR) pushing 8% through the decade to become a $5.36 billion sector by 2030. At the foundation are the traditional drivers of increased pet ownership and the “humanization of pets,” but we’re also seeing a push from advances in next-gen diagnostic tech – including point-of-care testing and AI analytics – and a growing concern over infections and chronic ailments (avian flu and the newest entry to the headlines, the new world screwworm). Diagnostics and veterinary clinic adoption make a compelling story for investors. 25,26

Meanwhile, individual veterinary clinics remain attractive to private equity and corporate rollups chasing dollars consumers are willing to spend for the latest and best care. The pace of innovation and new therapies veterinary clinics can offer – and their profit margins – are luring investors to a sector that is anything but static. And the money keeps coming. In September, Modern Animal – with 27 veterinary clinics in California, Texas, and Colorado – announced $46 million in new funding to grow its clinical and online virtual care units. In July, Small Door Veterinary, a membership-based veterinary clinic company, raised $55 million from private investors for its planned nationwide expansion. 27,28,29,30

There are only so many independent veterinary clinics, roughly 11,000, and since VCA’s first corporate clinic acquisition in 1987, the roll-up tsunami has accelerated. Corporate interests held about 30% of all practices by 2022. Individual valuations have moderated somewhat since their 2021 and 2022 peak, but we are still seeing robust valuations and strong buyer interest in the sector. 31,32,33

• Throughout 2025, newly founded Digs Dog Care, backed by Frontenac and Encore Management Group private equity investors, announced a national expansion, gobbling up 17 pet resorts that will be rebranded as “Digs” locations. The brand offers high-end, experiential spaces with services including daycare, boarding, grooming, and training. The company said that while it plans to continue expansion and acquisitions, it is being selective on M&A and focusing on integration. 35

• Terravet Real Estate Solutions, a real estate group that specializes in veterinary services real properties, began 2025 by entering the Atlanta market for the first time with the $5.4 million acquisition of two stand-alone veterinary practices and a pet boarding facility, all three in the suburbs. The Terravet REIT owns and manages more than a million square feet of animal care facilities in 35 states and is involved in multiple veterinary property management deals including sale-leasebacks, joint ventures, and renovation and expansion projects. 35

• December, Silicon Valley “pet emotional intelligence” startup Traini completed a $7.5 million round of funding for a product the company says will “bridge the communication gap between humans and pets.” Google and Meta (Facebook) previously invested in the tool, a “smart collar” the company bills as the world’s first cognitive collar that creates a human-dog “language” translation device built on AI. According to Traini, the collar interprets input from multiple data points to identify and track a dog’s emotional state and transmit that to humans creating a “richer understanding of their dogs’ emotional well-being and overall mental health.” 36

After a bumpy couple of years for pet sector M&A, we are hopeful to see activity pick up as investors and strategic buyers adjust to a “new normal” of higher rates and trade uncertainty.

Consumers may continue to feel pressure, and we’re learning that nothing – not even the pet services industry – is immune to economic variables. We are learning about pet owner preferences and a new demand for value, products and services that add to their pet’s life, both through enjoyment and health, not novelties. Supplements that boost pet health – and help avoid vet visits – are one bright spot. We believe businesses that adapt to meet customers where they are and develop unique, useful offerings can expect repeat business as long as pet owners want what’s best for their companion animals. 37,38,39,40

Pets are a wonderful part of our lives. But pet-centric businesses are, after all, just that, businesses. Whether it’s a specialty food product, a supplement, a friendly veterinary clinic, or a charming pet-centric retail outlet (complete with a friendly store cat), fundamentals apply more than ever. Clearly documented profitability and growth, proven and intellectual property protected products, the ability to adapt to customer demands, and a repeatable revenue model rule the day for investors.

The pet industry has become a hot space in recent years, but we have been involved in the industry for over a decade. Our experience and drive have placed us at the leading edge of information in the market, giving you an advantage when the time comes to buy, sell or seek investments to grow your pet-related business.

Our pet industry investment banking expertise includes the following segments:

• Pet Food
• Retailers
• Hard Goods
• Animal Health
• Veterinary Services
• Pet Care Services
• Co-Packers
• Pet Treats
• Pet Tech