Across the board, home health, hospice and home care M&A activity was down slightly in the first part of 2021 compared to last year’s busy end. The break in the action isn’t expected to last long, however, thanks to a relatively clear operating landscape across industries and multiple macro-level tailwinds in favor of home-based care.
Overall, the home health, hospice and home care segments saw at least 23 combined transactions during Q1 of this year, a substantial decrease compared to the 52 total transactions reported during the last quarter of 2020, according to the latest M&A update from advisory firm Mertz Taggart.
“Dealmaking activity was down in the first quarter, but much of that can be attributed to potential buyers finalizing the several deals executed in the second half — especially in the last quarter — of 2020,” Mertz Taggart Managing Partner Cory Mertz says. “We’re headed toward a record high for M&A activity, with robust interest from strategics and private equity buyers alike, across all in-home care areas.”
Of the deals that took place during the first quarter of 2021, the home health space saw the most activity, followed by hospice and home care, respectively.
Private equity led the way, accounting for 18 of the 23 total transactions. Three of those PE-driven deals were platform transactions, with 15 being add-on transactions.
“Hospice has been the big target over the past several quarters, but we may be seeing a shift back toward home health care,” Mertz noted.
Note: The sum of sub-industries (broken down below) does not always equal total sector deal volume, as some transactions include more than one sub-industry.
No headwinds for home health dealmaking
Transactions for Medicare-certified home health assets was steady from early 2018 through mid-2019. But after that period, buyers and sellers went on a dealmaking rollercoaster, with cautious buyers waiting to see how the Patient-Driven Groupings Model (PDGM) played out.
Many industry leaders expected PDGM to trigger a wave of transactions in 2020, with smaller agencies unable to adapt to the new payment overhaul. The COVID-19 pandemic threw a wrench in those plans.
“The CARES Act delivered tens of billions of dollars to U.S. health care providers,” Mertz says. “On top of that, the U.S. Centers for Medicare & Medicaid Services (CMS) expanded its advanced and accelerated loan program. That helped some home health operators stay in business a little longer as opposed to exploring a sale.”
There were at least 12 home health-related transactions in Q1 2021, down slightly compared to the previous quarter, which saw 17 deals. Again, the dip is likely tied to sellers reloading as opposed to a decreased interest in doing deals.
Among the deals reportedly taking place in Q1 was BrightSpring Health Services’ acquisition of Abode Hospice and Home Health. According to some reports, BrightSpring’s play for Abode came with a $775 million purchase price, with a multiple rumored to be in the mid-teens.
In February, Pharos Capital-backed Charter Health Care Group continued its aggressive growth in early 2021 by acquiring two home health and hospice assets in Omaha, Nebraska. Charter has since announced acquisitions of The Providence Hospice IInc. and The Providence Home Health Services Inc..
In March, LHC Group Inc. (Nasdaq: LHCG) and Orlando Health also expanded their Florida partnership with a move into the St. Petersburg area by realigning Bayfront Home Health Services into their existing joint venture.
Hospice M&A down, but not for long
Since Q1 2019, there have been at least 11 hospice transactions in each and every quarter. That streak may have ended in the first quarter of 2021 — it’s important to note some deals closed at the very end of March and others may still be unreported.
So far, there have been at least 10 reported hospice transactions in Q1 2021. That figure is a dramatic drop compared to both the 26 deals that occurred in Q4 2020 and the 18 transactions that took place during the same quarter a year prior.
“Hospice is still at the higher end of the valuation spectrum,” Mertz says. “Demand remains incredibly high for end-of-life care assets, but the supply just isn’t currently there. That’s one of the reasons we anticipate rising levels of interest for home health businesses, particularly with the public companies, since they generally have ample cash on hand that they want to deploy.”
In addition to the previously mentioned deals, Charter also purchased Serene Care Hospice in the Omaha market for an undisclosed amount. In February, AngMar Medical Holdings expanded its Angels Care Hospice brand with the acquisition of three unnamed hospice providers with locations in Texas and Nebraska.
Looking ahead, Bristol Hospice, backed by Webster Equity, is reportedly moving into the second phase of the acquisition process, with private equity firms standing as the only remaining bidders.
Of course, HCA Healthcare (NYSE: HCA) and Brookdale Senior living Inc. (NYSE: BKD) are also still in the process of finalizing a transaction where HCA will take over 80% of Brookdale’s hospice and home health business.
More big deals in home care expected
There were just nine home care-related transactions in the first quarter of this year, down from the near-term high of 15 that took place in Q4 2020.
In January, the Chicago-based Help at Home executed a deal for The Adaptive Group, a home health, hospice and home care services provider that operates across the state of Indiana. Help at Home is the 13-state in-home care provider backed by The Vistria Group and Centerbridge Partners.
“The winning combination of Adaptive and Help at Home not only means that we will be able to set the bar for high-quality care and service excellence in the state of Indiana, but also throughout the Midwest and across the broader United States,” Adaptive co-founder Mike Root said in a press release. “By partnering with Help at Home, we are better positioned to execute on our mission — to positively impact as many lives as possible through the delivery of exceptional, patient-centric home care services.”
Q1 wasn’t a blockbuster quarter for home care dealmaking, but that’s already changed in Q2.
On April 1, Advocate Aurora Enterprises — the investment arm of Advocate Aurora Health, one of the largest not-for-profit health systems in the country — announced it acquired Senior Helpers. With more than 320 franchised and corporate-owned locations in 44 states, in addition to Canada and Australia, Senior Helpers is one of the largest home care organizations in the market.
Days later, on April 8, the company that owns Home Helpers Home Care announced it had been acquired by Chicago-based private equity firm RiverGlade Capital. The Cincinnati-based Home Helpers is likewise one of the largest home care franchise organizations in the U.S.
“A lot of the big home care franchise companies were acquired between 2015 and 2018 by PE buyers,” Mertz says, “Those PE firms are now nearing their typical exit timeframe, so we should see plenty of additional home care deals to come later this year.”
On the horizon
The first quarter may have been down somewhat for home health, hospice and home care M&A activity, but the action is all but guaranteed to pick up throughout the rest of 2021.