Pet Industry M&A Sees Shift Towards Higher Valuations Amidst Deal Slowdown
The pet industry’s mergers and acquisitions landscape is currently experiencing a paradox: a notable reduction in the volume of deals, yet an increase in the average value of individual transactions. This shift signals a more discerning investment climate where quality and strategic fit are paramount. Despite a general slowdown in deal frequency, particularly in the United States, robust valuations are emerging as a key driver, potentially reinvigorating acquisition activities in the coming periods.
Pet Industry M&A Dynamics: A Detailed Overview
Recent analyses from investment banking firms such as Cascadia Capital and R.L. Hulett reveal a complex picture for the pet market’s mergers and acquisitions. In the US, the first quarter of 2026 saw a 13.3% year-over-year decline in the total value of M&A transactions, settling at $196 billion (€170 billion) from $226 billion (€196 billion) in Q1 2025. The reduction in the sheer number of deals was even more pronounced, dropping by 19.2% from 4,211 to 3,402 within the same timeframe. However, this dip in volume coincided with an upward trend in average deal value, evidenced by an increase in EV/EBITDA valuation multiples from an average of 11.4x in 2025 to 12.1x in 2026. This indicates a return to pre-pandemic valuation norms, with investors showing greater selectivity but also a readiness to commit more capital for strategically sound acquisitions.
Experts like Aarti Kapoor and Bryan Jaffe from Cascadia Capital anticipate that “2026 multiples are expected to revert to longer-term averages after valuation multiple compression in 2023-2025.” This outlook is drawing renewed interest from owners contemplating divesting their companies, especially those holding assets in sponsor portfolios for over five years. A comprehensive database of over 175 industry transactions since 2010 positions animal health as the sector with the highest EBITDA multiples (19.2x), followed by veterinary services (17.3x), retail (13.6x), consumables (12.5x), and pet products (8.8x).
Another catalyst for a potential rebound in deal activity for the remainder of 2026 is enhanced market clarity. “Operators now have a clearer understanding of their businesses,” the report notes, having navigated various challenges such as consumer price sensitivity, tariffs, and other pressures impacting profit and loss statements. This improved visibility is facilitating more constructive valuation discussions between buyers and sellers.
Key “sweet spots” identified for future M&A activities include consumables, services, and health. In the consumables segment, recent significant transactions, such as Agrolimen’s acquisition of Ollie, Pure Treats’ purchase of Primal Pet Foods, and Made by Nacho’s buyout of I and Love and You, underscore a continued consolidation trend among producers aiming to bolster their capabilities. These deals also highlight robust investor interest in the fresh and frozen dog food categories, which are witnessing significant sales growth in the US.
The services sector also saw notable deals in Q2, including Chewy’s acquisition of Modern Animal, Tractor Supply’s purchase of VIP Petcare, and Great Hill Partners’ investment in Woof Gang Bakery & Grooming. The report emphasizes that pet services are becoming a central focus for investors due to long-term growth prospects, supported by trends like urbanization and the return to office work, alongside the highly fragmented nature of the market.
Globally, R.L. Hulett’s analysis indicates a 52% fall in sector M&A volume in Q1, from 152 to 73 transactions. Europe led in activity, accounting for over 40% of deals, followed by the US (27.4%), Asia (11%), Latin America (10%), Oceania (5.5%), and Africa (3%). Pet products dominated subsector activity with 37 deals, while pet and animal services reported 17, and veterinary care services registered 6. Despite the reduction in volume, the total deal value surged from $0.2 billion (€0.17 billion) in Q1 2025 to $0.9 billion (€0.77 billion) in Q1 2026, driven by a shift towards larger transactions. Dax Kugelman of R.L. Hulett forecasts a positive outlook for the rest of the year, stating that the “COVID-fueled pet spending boom created a larger addressable market, so acquirers are still hunting for consolidation plays even in softer markets.”
The current landscape in the pet industry’s M&A market offers valuable lessons for both investors and business owners. The shift towards higher valuations despite fewer deals suggests a maturation of the market, where investors are increasingly prioritizing quality and strategic alignment over sheer volume. For businesses within the pet sector, this indicates a need to demonstrate clear growth potential, strong financial health, and a differentiated market position to attract premium valuations. Furthermore, the focus on specific “sweet spots” like animal health, specialized consumables, and burgeoning service sectors highlights areas ripe for innovation and consolidation. As market visibility improves and investors become more confident, we can anticipate a more targeted yet robust M&A environment that rewards well-positioned companies and strategic investment plays.