Behavioral Health M&A A recent uptick in behavioral healthcare mergers and acquisitions and pent-up demand by private equity to transact has buyers both new and old appearing poised to hit the ground running in 2025. A total of 37 transactions—26 traditional M&A deals and 11 growth deals—were reported in the fourth quarter of 2024, bringing the total for the year to a combined 155 transactions. The 11 growth deals in Q4 had a combined value of about $170 million. Traditional M&A activity for 2024 was fairly consistent with the prior year. As 2024 came to a close, the volume of chatter among potential buyers from all corners increased, Mertz Taggart Managing Partner Kevin Taggart said. “If you look at most active buyers, it's pretty well spread out,” said Taggart. “Buyers who had been sitting on the sidelines for a while reached out to us late in Q4 to catch up before the new year, and we're starting to see some of the old buyers who haven’t been as active the past couple of years show interest in looking at deals again. That's a positive sign. Overall, we’re very optimistic about 2025.” The return to the White House of President Donald Trump for a second term could provide a catalyst for an increased flow in deals, with the Trump administration’s demonstrated preference for deregulation viewed as a positive for deal-making, Taggart said. With that being said, over the last few weeks things have been moving very quickly in Washington, which has given some buyers pause for certain sectors of behavioral health. If behavioral healthcare M&A activity does ramp up in 2025, Taggart pointed to two subcategories that could be poised for a comeback: addiction treatment, which has several strategic buyers showing renewed interest in making acquisitions, and autism, where slightly new models are attracting the attention of different buyers. Addiction Treatment M&A Just 8 deals involving addiction treatment providers were reported in Q4, up from 6 deals reported in Q3. Overall in 2024, 36 addiction treatment provider transactions were announced, a modest increase from 2023, which saw 29 deals, but still an unexpectedly low total and a far cry from the halcyon days of 2021, in which 79 transactions were completed. “If we look at the addiction subcategory, it was pretty anemic in 2023, and it was still slow in 2024,” Taggart said. “But I think that's going to rebound because some of the buyers that are coming back into space are more in the SUD side.” Among those buyers making a splashy return: Acadia Healthcare , which acquired 3 South Carolina-based opioid addiction treatment programs in October. The Franklin, Tennessee-based behavioral healthcare services company acquired Recovery Concepts , Recovery Concepts of the Carolina Upstate , and Clear Skye Treatment Center . Those programs were rebranded as Clinton Comprehensive Treatment Center, Easley Comprehensive Treatment Center and Ridgeland Comprehensive Treatment Center, respectively. Other transactions involving addiction treatment providers in Q4 included the following: Santé Center  in Argyle, Texas, was sold to two staff members—Sam Slaton, MEd, LPC, MBA, MHSM, and Michelle Luttrell, MA, LMFT-S, MBA, MHA—and Keith Klein, MC, CPA. Lawrence Medical Center  acquired  New Horizons Medical , which operates six clinic locations, as well as a mobile clinic. Owner Resource Group, an Austin, Texas-based private equity firm, announced that ORG Opportunity Fund IV and its affiliates completed an investment in Purpose Healing Center . Peace Medical  in Oakland Park, Florida, was acquired by an undisclosed “healthcare professional with an existing general health practice,” according to a news release. Mental Health M&A The fourth quarter of 2024 saw 25 deals involving mental healthcare providers, bringing the total for the year to 99 transactions. When excluding growth deals, transaction volume in 2024 was down from the previous two years. While there is still demand for medical outpatient and psychiatry practices, valuations for outpatient mental healthcare care facilities have come down slightly, Taggart said. Demand for counseling-only practices is down as well, he added. Q4 deals involving mental healthcare providers included the following: Carlyle Group-backed Odyssey Behavioral Healthcare , traded hands for the first time since 2018. JLL Partners acquired the platform in November. Odyssey provides facility-based behavioral health care that addresses substance use, eating, mental health, and process disorders. American Health Partners announced a transaction for Unity Psychiatric Care  in a private equity-backed strategic deal. Los Angeles-based  Amae Health  announced that it raised $6 million through a partnership with nonprofit academic health system Cedars-Sinai Medical Center . Clinica Family Health  announced a merger with Mental Health Partners  to form Clinica Family Health & Wellness. CuraLinc Healthcare  acquired the employee assistance program of Wellspring Family Services in a deal backed by primary investor Lightyear Capital. Family of Kidz  in Westbury, New York, acquired Milestones for Munchkins . Private equity firm Fireside Strategic Corporation made an investment in South Lake Center for Self Discovery in Davidson, North Carolina. Hightop Health , an outpatient mental health group, expanded its network of programs in the Atlanta area to 7 facilities with its acquisition of Georgia Psychiatry & Sleep  in a private equity-backed strategic deal. Neuronetics  completed its previously announced acquisition of Greenbrook TMS . Paramount Health Management  acquired St. George, Utah-based  Life Launch Centers and its four facilities in the state. The Queen’s Health Systems has acquired O‘ahu-based Kahi Mohala  from California-based Sutter Health Pacific. Kahi Mohala is the only freestanding, not-for-profit psychiatric hospital in the state of Hawaii. Mental healthcare provider Resilience Lab  announced an expansion of its services to include medication management and treatment of severe mental illness with its acquisition of AI-enable psychiatry provider Options MD . Stella ,   an interventional psychiatry practice, acquired the 5 Utah wellness clinics of psychedelic-assisted therapy provider Numinus Wellness for $3.53 million in a private equity-backed strategic transaction. Lynchburg, Virginia-based mental health provider Thriveworks acquired Synchronous Health , an AI-powered behavioral health company based in Nashville, Tennessee. Autism and Intellectual/Developmental Disabilities M&A After a slower 2023, the autism and intellectual/developmental disabilities (I/DD) subsector saw 7 deals announced in the fourth quarter of 2024 and 30 total deals for the year. Major bankruptcies, large strategic ABA companies struggling,  and wage inflation for registered behavior technicians (RBTs) were among the factors that have strained the autism and I/DD subsector in recent years, Taggart said. "Many providers struggled post-COVID, but some of the dust has settled on that, and we expect it to continue to improve, as buyers are showing interest in jumping back in,” Taggart said. “We're also seeing some slightly new models in that space that I think are attracting some interest from different buyers.” The following deals involving providers of autism and I/DD services were announced in fourth quarter: Autism Spectrum Interventions  acquired Los Angeles-based applied behavior analysis (ABA) therapy provider Quality Behavior Solutions  in a strategic deal backed by private equity firm Fletch Equity. Goldman Sachs Alternatives acquired autism therapy provider Center for Social Dynamics  in a private equity platform transaction. Helping Hands Family (HHF), a provider of ABA therapy, acquired Mission Autism Clinics  (MAC). The 12 MAC facilities will transition to the HHF brand as part of the deal. Living Innovations Home Care  acquired Momentum , a Maine-based provider of shared living and other behavioral health services to individuals with I/DD. Kelly , a workforce solutions provider, acquired Children’s Therapy Center . The childhood therapeutics company will be integrated into the Pediatric Therapeutic Services arm of Kelly's education workforce solutions provider, Kelly Education. Proven Behavior Solutions , a provider of outpatient therapy services for Massachusetts children with autism, acquired Prism Autism Education & Consultation  of Connecticut. If you are interested, you can also download the Q4 2024 Behavioral Health M&A Report via the following link:

The slowdown continued. But the pick-up is happening. After a booming M&A landscape in 2021 gave way to a moderate 2022 and 2023, home-based care dealmaking slowed considerably in 2024, dropping from 183 deals in 2021 to 110 in 2023 down to just 72 in 2024. That decline in 2024 ended with just 14 transactions in Q4, tied for the lowest quarter for home-based care M&A activity since the pandemic. But don’t expect things to stay that way. “Things are starting to move,” says Cory Mertz, Managing Partner at Mertz Taggart. “More transactions are moving forward. They just haven’t gotten across the finish line. But expect they will in 2025.  At the risk of getting ahead of ourselves, we’re seeing a fast start to Q1 2025, in terms of deals closed.” Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. Home care led the way with eight transactions, followed by six in hospice and just two in home health. Nine of the deals featured PE-backed companies. Election Impact on Home-Based Care M&A The most significant event in Q4 was undoubtedly the election.  While impacts from DOGE and the current administration’s view on Medicaid funding (and its potential impact on home-based care) are not yet known, positively or negatively, the Trump administration is expected to bring a positive shift to the healthcare M&A landscape by encouraging private sector growth and reducing regulatory hurdles. Recent scrutiny of private equity investment in healthcare in the form of legislation at both the federal and state levels has created uncertainty in the market, but the new administration’s anti-regulatory stance could reverse this trend and foster a more transaction-friendly environment. Added Mertz, “By focusing on deregulation, the administration is creating a climate where private equity investors have more confidence they can get deals more efficiently, unlocking opportunities in the healthcare sector.” Home Health M&A   Of the past 16 quarters, the two lowest quarters in home health M&A came in 2024: Q1, with four deals completed, and Q4, with just two. The first of those two was announced on October 13, when Brooklyn-based home health care agency Prime Home Health Services acquired the assets of Visiting Nurse Association of Staten Island (VNASI), which had ended its operations September 27. “That operation closed down, and Prime will do our best to continue to service the community by using and recognizing the name and how it resonates,” Prime Home Health Services CEO Christopher Doulos said in a statement. The second deal came less than a month later, when Choice Health at Home acquired the Oklahoma City-based Accentra Home Health and Hospice . As Choice noted, the acquisition means it will be able to cover 90% of Oklahoma’s urban and rural geographies. “This will improve the lives of our nurses, there will be less travel time and more density of patients in the metro areas,” Choice CEO David Jackson told Home Health Care News . “But also, it gives us the license numbers in the state to really be able to reach out and touch people in the rural areas as well. So, from a strategic planning perspective, we want to cover the Southwest, with Oklahoma included. Within that, we’re really intent on providing care in rural and urban settings, and this gives us the opportunity to do so.” Hospice M&A Choice’s acquisition of Accentra is also a hospice transaction, one of five that closed in Q4. The other four were all solely hospice. Hospice transaction activity has taken the biggest hit post-COVID of any of the three sectors; 2024 saw 25 hospice deals, down from 30 in 2023, 41 in 2022 and 81 in 2021. The four other hospice deals in Q4: Private equity firm Martis Capital acquired Dallas-based Three Oaks Hospice for $150 million. Chapters Health System acquired four non-profit hospices, including Hospice of Santa Cruz County . Long-term care company Mission Health Services acquired Utah-based Angel’s Crossing Home Hospice . Nevada-based Eden Health acquired A Plus Hospice Care . “This acquisition represented an expansion opportunity into an adjacent market within a state where the buyer, Eden Health, had developed a growing footprint,” Spencer Walters, senior director of Eden Health,  told Hospice News  in an email. “Eden Health has successfully grown their regional presence by supplementing organic growth efforts with an aggressive acquisition strategy.” Home Care M&A The busiest sector in Q4 was home care, with eight deals completed.  The biggest mover: Vistria-backed Help at Home, who completed four transactions in the quarter, including Helpmates Home Nurses in Pennsylvania, and Florida-based Caregiver Services (CSI). “CSI knows what it takes to be an employer that can cultivate a compassionate care workforce, and they’re also focused on providing high-quality care and being a trusted partner with the state of Florida and their payers in the communities they serve,” Ray Smithberger, chief operating officer of Help at Home, told Home Health Care News  following the deal. Other notable transactions in Q4 include: Canada-based Nova Leap Health acquired a Florida-based private duty home care agency in Florida.  While the selling company’s name has been withheld at Nova Leap’s request, the financial terms were made public.   Nashville-based Avenues Home Care acquired Texas-based Clear Path Home Care . Havencrest-backed Avid Health at Home, LLC acquired Sandhills Home Care in North Carolina. 2025 Outlook “We expect activity to pick up in 2025 relative to 2024.  There is too much pent-up demand from private equity, driven by aging dry powder.  These are committed funds from their LP investors that they have not yet been able to invest.   Leaving committed funds uninvested can make raising their next fund more of a challenge, so there is an impetus to invest now,” Mertz said. “We also expect to see more activity by sponsor-backed portfolio companies seeking an exit.  Some of them have shared with us that they’ve held off on their previously planned exits and see 2025 as the year to transact so they can ultimately give their investors a return on their capital.  If it’s a successful exit, and many will be, they will then be armed with good results that they can boast as they raise their next fund.” If you are interested, you can also download the Q4 2024 Home-Based Care M&A Report via the following link:

After a historically slow first quarter that saw only 13 total deals in the home-based care space, M&A picked up significantly in the second quarter, albeit not in every aspect. Home health, home care and hospice saw 20 total deals in the second quarter, with the home health and hospice sectors leading the way at 10 and nine deals, respectively, while home care dealmaking mostly held steady at seven. (Note, many transactions include more than one service line.) Home-Based Care M&A Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. Dealmaking generally picks up in the second half of the year due to rate setting, particularly in home health and hospice. Both proposed payment rules are now out for each respective sector. But this year, there could be additional factors contributing to back-half activity. For instance, inflation has continued to cool, and investors have renewed optimism around a rate cut or two from the Federal Reserve in the back half of 2024. That in turn would clear the runway for more deals, particularly for private equity. Private equity only accounted for six of the 20 deals in the second quarter, a smaller proportion than usual, notes Mertz Taggart managing partner Cory Mertz. “We saw fewer private equity-backed strategic transactions hit the wire relative to the whole,” says Mertz. “This is primarily tied to the tightened credit markets, and an increasing number of smaller, in-market transactions that don’t get reported.” The second quarter did see a few large, standout deals announced, including Addus ’ agreement to acquire Gentiva’s personal care business, Amedisys ’ agreement to divest approximately 100 locations to VitalCaring and Pennant’s deal with Hartford HealthCare . These transactions have been announced, but have not yet closed and therefore do not contribute to the totals. However, “We’re seeing optimism around a thaw in dealmaking,” Mertz commented. Home Health M&A Over the last few years, the reduction of quality home health assets going to market has contributed to a dealmaking downturn. There was a decent amount of home health activity in the second quarter, but the proposed payment rule — released at the end of June — will likely affect M&A the rest of the year. That said, determining how proposed and finalized payment reductions will affect the market is always difficult. The Centers for Medicare & Medicaid Services (CMS) proposed a 1.7% aggregate cut to 2025 payments, or about $280 million. “Industry stakeholders are justifiably up in arms over the proposed cut, which includes another ~4% permanent cut,” Mertz said. “From an M&A perspective, it’s another step towards certainty, which helps unlock transactions.” The Pennant Group (Nasdaq: PNTG) agreed to a partnership with Hartford HealthCare at Home (HHCAH), the home health and hospice segment of Hartford HealthCare, in the second quarter. That deal would take Pennant into Connecticut, bringing the company into the East Coast for the first time. Pennant had previously not had any home health locations east of Wisconsin. Amedisys Inc. (Nasdaq: AMED) also agreed to divest approximately 100 locations to VitalCaring . The exact location count and price tag have not been announced, but that deal would be a major one. It will only go through if UnitedHealth Group’s takeover of Amedisys goes through. But the divestment likely clears the path for the UnitedHealth Group-Amedisys deal, which was receiving antitrust scrutiny from regulators. Amedisys stock jumped from $92 to $97/share on the news. Finally, HCS-Girling — which recently acquired the personal care assets of Addus HomeCare Corp . (Nasdaq: ADUS) in New York — agreed to acquire Pinnacle Home Care , a large Medicare-certified home health provider with locations throughout Florida. Home Care M&A Home care was the slowest of the three categories in the second quarter, but Mertz also notes that some PE-backed strategics don’t always disclose personal care add-ons as they happen. “These same strategic buyers are still active, but many of them are sourcing their own transactions, which include some smaller deals which don’t ever get reported,” says Mertz. While Addus exits the New York market, it immediately set out to gain significant personal care market share elsewhere. If its $350 million deal for Gentiva’s personal care assets is finalized, it will become the largest home- and community-based services (HCBS) provider in Texas, a state it did not previously have a significant personal care presence. Addus also entered other states for the first time, including Missouri and North Carolina. Other notable deals from the home care world in the second quarter: ● HouseWork’s acquisition of AccordCare’s Connecticut personal care division ●  Family Resource’s acquisition of Specialty Service Solution in Washington state ●  Commonwise Home Care’s acquisition of Caregivers of Charleston Hospice M&A While the home health industry continues to face cuts, hospice providers have mostly had a stable payment environment. In March, CMS proposed a 2.6% increase to hospice per diems for 2025. The Pennant Group was also one of the more active buyers in hospice, acquiring South Davis Home Health & Hospice in Utah and Texas-based Nurses On Wheels . There were also more pure-play hospice deals in the second quarter than there were in the first quarter. One of the larger home-based care companies got involved too, as BrightSpring Health Services (Nasdaq: BTSG) agreed to acquire the nonprofit Haven Hospice , based in Florida.. Other notable hospice deals in the quarter: ● Northrim’s acquisition of Noble Hospice and Palliative Care , based in Phoenix ● Dover Health’s acquisitions of Centered Care Hospice and Palliative , based in Illinois ● Vitas Healthcare’s acquisition of the previously-announced Covenant Care , with locations in Florida and Alabama, for $85 million. "It's one quarter worth of data, but it's encouraging to see," Mertz said. "We talk with buyers and private equity regularly. The general opinion is that we saw the bottom in healthcare services M&A transactions in Q1. We'll be monitoring the inflation numbers and the Fed's comments over the next few months." If you are interested, you can also download the Q2 2024 Home-Based Care M&A Report via the following link:

In mid-September, the Federal Reserve slashed interest rates for the first time since March 2020. And, with that news, there are signs of life in home health, hospice and home care M&A. Though there are certainly internal issues affecting each sector, recent macroeconomic pressures have impacted the number of transactions more than any other factor. Home-Based Care M&A After a flurry of deals in 2020 and 2021, home-based care M&A plunged. That low level of dealmaking bottomed out in Q1 2024 ( Home-Based Care M&A Report Q1 2024 ), with just 14 total transactions closed. Transaction volume has since picked up, with 24 deals closed in Q2 ( Home-Based Care M&A Report Q2 2024 ) and 19 in Q3. Note: Total industry transactions do not necessarily equal the sum of the sub-industries, as many transactions include more than one sub-industry. Dealmaking is expected to continue its positive momentum.  However, that is assuming the Fed will continue to lower rates over the next 6-9 months. “Many folks assume since the fed started lowering rates, that they will just continue down this path going forward,” Mertz Taggart Managing Partner Cory Mertz said. “We are optimistic, but rates will still largely depend on inflation, which the Fed is watching closely.” Overall, there were six home health deals, six hospice deals and eleven home care deals completed in the third quarter. (Note:  The sum of the sub-industry transactions is greater than the total number of deals reported, as many transactions include more than one sub-industry.) Private equity accounted for more than half of all the deals executed in the quarter. “We’re climbing out of the slump and confident there was a bottoming out in Q1 2024 in terms of deal activity, but the recovery may not be perfectly smooth when looking at quarter-to-quarter data,” Mertz said. The third quarter did see a few large deals completed, however, including BrightSpring Health Services’ (Nasdaq: BTSG) $60,000,000 acquisition of Haven Hospice and The Pennant Group’s (Nasdaq: PNTG) acquisition of Signature Healthcare at Home’s assets. Home Health M&A Since the 2020 and 2021 flurry, there have been fewer quality home health agencies that have gone to market. That, combined with the macroeconomic environment, has led to fewer deals in the home health space. There’s also rate pressure pushing down on home health providers. The Centers for Medicare & Medicaid Services (CMS) has reduced payment over the last few years in traditional Medicare. Meanwhile, Medicare Advantage (MA) penetration has continued, and MA plans tend to pay at a lower rate for home health services. Still, the demand for solid home health organizations has not waned. “Home health M&A activity remains slow. There just aren’t very many attractive targets that have come to market over the past eighteen months or so,” says Mertz. “Demand remains strong, and the constant reimbursement pressure has not deterred buyers.” “Home health remains central to nearly all the larger strategic buyers’ value-based care strategies ,” Mertz continued. “Some include personal care, some include hospice, but they almost all include home health.” In the quarter, The Pennant Group acquired Signature Healthcare at Home’s Washington and Idaho assets from Avamere . The $80 million purchase price represented the largest deal in Pennant history. The deal is one of many that Pennant has executed of late. It has been one of the more active acquirers during a quiet M&A period. Ascension Health/TowerBrook Capital-owned Compassus also stayed on track with its joint venture strategy, forming an agreement with OhioHealth that includes four home health locations that the former will now operate. The company has also recently agreed to JVs with the health systems Ascension and Providence . “We are seeing much more interest from historically strategic acquirers in exploring joint ventures with health systems,” Mertz commented. “It just makes sense, for both the operator and the health system.  And LHC has successfully proved the model out.” Home Care M&A Home care M&A remains the most active of the three sectors, with 11 reported transactions closed. Despite the Medicaid Access Rule being finalized, and the looming 80-20 provision being included, buyers have not backed off of inorganic growth. Many of the home- and community-based services (HCBS) strategists believe that significant scale is necessary to survive under 80-20. “On the personal care side, deal activity remains pretty steady, buoyed by government-funded personal care agencies, predominantly HCBS, which has not slowed despite the 80-20 provision,” says Mertz. “If the provision were to take effect in January 2025, we would be telling a different story. But so much can – and likely will – happen between now and when this is supposed to take effect, including at least one or maybe two changes in administration.” Vistria- and Centerbridge-backed Help at Home – one of the largest home and community-based providers in the country – has continued to acquire, announcing three more deals in the third quarter: acquisitions of Care By Your Side , AA Medcare and One Care Health . “Growth continues to be really strong in what we do, both organic growth and M&A activity,” Help at Home President Tim O’Rourke recently told Home Health Care News. “We continue to see that as a big opportunity for us, not only today, but in the future.” Avid Health at Home , backed by Havencrest Capital Management, also logged another deal, acquiring Central Illinois Care Services . InTandem Capital-backed HouseWorks , too, stayed busy, acquiring Bridge City Home Care . Hospice M&A Hospice M&A transaction volume remains low, but it is not a reflection of buyer sentiment.  “Of the three home-based care service lines, hospice still commands the highest multiples, and it’s largely a reflection of a historically stable reimbursement environment,” Mertz added. “However, we are seeing, and expect to see, more regulatory scrutiny in hospice. This has forced the buyer universe to become much more discerning about which opportunities they will pursue and, ultimately, close on.” The U.S. Government Accountability Office (GAO) urged CMS to step up hospice oversight earlier this year, and steps are being taken to reduce fraud in a number of states already. In the third quarter, Ridgemont Equity’s Agape Care acquired Crossroads Hospice , while Gilchrist Hospice Care acquired Hospice of Washington County . “We’re encouraged to see the continued positive momentum in home-based care M&A, both in terms of data and real-time buyer sentiment” Mertz said. “And Q4 is historically the strongest of the four quarters. But continued momentum will be largely dependent on the Fed and what they are expected to do, and ultimately do, with interest rates. Inflation can be stubborn and difficult to tame. We’ll know over the next couple quarters if they have done enough to continue to lower rates.” If you are interested, you can also download the Q3 2024 Home-Based Care M&A Report via the following link:

Mertz Taggart follows the publicly traded home-based care companies and reports on their earnings calls each quarter. As a group, public company performance and share price serve as a proxy for industry performance and investor sentiment, respectively. Historically seen as the “ultimate consolidators”, the publicly traded home-based care trading multiples have a downstream effect on lower middle market home-based care M&A. Addus Homecare (Nasdaq: ADUS) Highlights Addus delivered strong operating results in Q3 2024, with total revenue increasing by 7% to $289.8 million from $270.7 million in Q3 2023. This growth was driven by a combination of solid organic expansion and contributions from recent acquisitions. The personal care segment, representing 74% of total revenue, experienced 6.7% organic growth in Q3 2024 compared to Q3 2023, driven by strong demand and favorable reimbursement across its markets. In the Q3 2024, the company hired 79 personal care caregivers per business day, while turnover rates remained historically low. The hospice and home health segment's revenue growth was primarily driven by the 2023 acquisition of Tennessee Quality Care. The hospice segment’s average daily census grew modestly to 3,534 in Q3 2024, a 2.3% increase from 3,453 in Q3 2023. The Company maintained a stable gross profit margin of 32%, consistent with the levels reported in both Q3 2023 and Q2 2024. Key Financial Figures M&A Activity Addus is moving forward with the acquisition of Gentiva’s personal care business to strengthen the scale of its personal care segment. As Addus CEO Dirk Allison noted, “upon the close of this transaction, Addus will be the largest provider of personal care services in the state Texas, which is primarily a managed Medicaid market. In addition, this transaction will give us a larger presence in Arkansas, strength our California and Arizona private pay and Veterans Affair businesses and will add a location in Eastern Tennessee to our existing operations in the state and provide entry into both Missouri and North Carolina.”  ADUS expects the Gentiva acquisition to close in fourth quarter and will add $280 million in annualized revenues in personal care services. On May 21, 2024, the company agreed to sell its New York operations to HCS-Girling for up to $23 million, with the transfer contingent on regulatory approvals.  Guidance Addus expects a positive impact on the personal care segment from favorable reimbursement rates across its operating states. Starting January 1, 2025, Illinois, the largest state for personal care services, will implement a 5.5% rate increase. Aveanna Healthcare (Nasdaq: AVAH) Highlights Revenue for Q3 2024 totaled $509 million, reflecting a 6.5% increase compared to Q3 2023. Aveanna achieved year-over-year growth across all three operating divisions, with Private Duty Services increasing 6.4%, Medical Solutions rising 12.6%, and Home Health & Hospice growing 2.2% compared to the same period in 2023. EBITDA for the quarter was $36.8 million, representing a 14.3% increase year-over-year. This growth was primarily driven by strong performance in its private duty division, an improved payor rate environment, the successful implementation of cost reduction initiatives, and focus on episodic payers within its home health division. Aveanna recognizes that the primary challenge is the labor environment, particularly the shortage of available caregivers. In the past quarter, the company has seen notable improvements in caregiver hiring and retention trends, positively impacting its financial performance. Organic growth across all segments compared to the prior year: Private Duty hours grew 3.8%, Home Health & Hospice episodes grew 1%, and Medical Solutions had a 4.5% increase in unique patients served. Key Financial Figures M&A Activity Aveanna CEO Jeff Shaner stated, “We feel like we have not only stabilized the company but put the company back on the rightful path for growth and success. And we believe it’s time for us to reenter the M&A market.”  The company plans to close transactions in 2025, focusing on acquisitions within the Private Duty Nursing and Home Health & Hospice segments as part of its inorganic growth strategy. Guidance Aveanna expects to continue the momentum into 2025. Year-to-date, Aveanna has secured 12 state rate increases for Private Duty Services, with additional states expected to implement increases in early 2025.  In addition, the Company is in the early stages of implementing the preferred payer strategy in Medical Solutions to be fully realized by the end of 2025 The Pennant Group, Inc. (Nasdaq: PNTG) Highlights For Q3 2024, the company reported total revenue of $180.7 million, an increase of $40.5 million or 28.9% compared to Q3 2023. The company has invested in leadership, increased occupancy, improved revenue quality, and enhanced operational performance to drive this growth. The Home Health segment continued to show strong growth, with quarterly revenues reaching $72.9 million, a 43% increase year-over-year. Total home health admissions increased by 38.5%, while Medicare home health admissions increased by 30.8%. The Hospice segment achieved a 25% increase in revenue year-over-year, supported by improvements in hospice programs and the successful integration of recent acquisitions, which have helped differentiate its operations within the community. Hospice admissions increasing by 22.8%. The Senior Living segment generated $45 million in revenue, representing a 16.3% increase over the prior year quarter. Key Financial Figures M&A Activity In August, PNTG completed the first phase of its $80 million planned acquisition of Signature Group, LLC operations (Washington and Idaho assets). This acquisition added four home health agencies and one hospice agency to the Company’s portfolio. According to PNTG’s President & COO, John Gochnour, “The integration and transition of these operations is proceeding well, and we are starting to unlock additional value by implementing our unique operating model, sharing best practices, and providing world-class support from our service center.” The Oregon assets of Signature represent the second and larger portion of the transaction, with preparations for closing on January 1, 2025.  Guidance Considering the company’s geographic distribution and the finalized wage index updates, Pennant anticipates a net neutral effect on per-episode reimbursement under the 2025 Final Rule. PNTG has raised its full-year 2024 guidance as follows: total revenue between $665.3 million and $706.5 million, adjusted earnings per diluted share between $0.90 and $0.96, and adjusted EBITDA between $51.9 million and $55.2 million. This guidance update reflects strong expected performance through year-end, hospice reimbursement adjustments, lower interest expenses, and contributions from joint ventures and management agreements. Enhabit Home Health & Hospice (Nasdaq: EHAB) Highlights Enhabit total revenue was $253.6 million for the third quarter down $4.7 million or 1.8% year-over-year. EBTIDA was $18.1 million up $2.6 million or 16.8% year-over-year. EBITDA still lower than Q1 2024, and Q2 2024.  Home Health revenue declined by $9.9 million. Non-Medicare admissions grew 20.1%, driving total admissions growth of 5.6% year-over-year. Of these non-Medicare visits, 45% are now under payor innovation contracts at improved rates. However, while admissions grew, recertifications declined due to more admissions from acute care facilities with shorter stays and a changing payor mix in congregate living settings. This drop in recertifications was the main factor in the revenue decrease. Hospice revenue grew by $5.2 million or 11% year-over-year, driven by higher patient days and improved reimbursement rates. Since January 2024, the average daily census has risen monthly, with a 6.9% increase in Q3, including 5% same-store growth. Key Financial Figures M&A Activity The company remains limited by its credit agreement, which restricts acquisition opportunities due to current debt levels. As Enhabit Senior Vice President and Treasurer Jobie Williams stated, “We have focused this year on accelerating cash and paying down debt, and our success can be seen in our results. Our leverage decreased for the third quarter in a row. We ended the third quarter with a leverage ratio of 4.8 times.” Guidance Enhabit has revised its 2024 guidance due to lower recertifications in Q3 and the impact of hurricanes. In Q3, 29 home health branches were affected by Hurricane Helene, and 21 by Hurricane Milton, with 12 impacted by both, resulting in an estimated loss of 425 to 450 admissions.  The revised full-year revenue forecast for 2024 is $1.031 billion to $1.046 billion, with adjusted EBITDA expected between $98 million and $102 million. Starting October 1, 2024, the hospice segment received a 4% reimbursement rate increase, expected to generate an additional $8 million annually. For home health, 2025 revenue is projected to grow by low- to mid-single digits, driven by admissions, census growth, and a shift to higher-paying Medicare Advantage plans. This growth is also supported by a continued focus on operational efficiency. BrightSpring Health Services, Inc. (NASDAQ: BTSG) Highlights BTSG total revenue in Q3 2024 was $2.9 billion, representing 29% growth from the prior year period.  Pharmacy Solutions segment revenue was $2.3 billion, achieving growth of 35% year-over-year. Within the segment, Infusion and Specialty revenue was $1.7 billion, reflecting a 42% increase compared to last year. And home and community pharmacy revenue was $588 million, marking growth of 19% year-over-year.  The Provider Services segment had revenue of $641 million, representing growth of 10% compared to the prior year period. Home health contributed $265 million, growing 13%, with average daily census rising 16% to over 46,000. This growth was driven by strong clinical quality, including 30-day readmission rates that are 60% lower than the national average, particularly notable in the company’s emerging primary care services. Community and rehab care revenue was $376 million, representing growth of 8% year-over-year.  Gross profit increased across all segments compared to Q3 of last year. Adjusted EBITDA reached $151 million, reflecting a 16% year-over-year growth. Key Financial Figures M&A Activity During the nine months ending September 30, 2024, BTSG completed seven acquisitions across its Pharmacy Solutions and Provider Services segments, aimed at expanding its services and geographic reach.  On September 1, 2024, BTSG announced the acquisition of North Central Florida Hospice, Inc. ("Haven Hospice"), which provides hospice and palliative care services throughout Florida. As CEO Jon Rousseau stated, “Towards the end of the third quarter, we announced the closing of the Haven Hospice acquisition, and we look forward to expanding our quality care to high-need patients in Florida. Our hospice business continues to show strong growth, with excellent patient satisfaction, currently holding an 84% overall care rating according to the Consumer Assessment of Healthcare Providers and Systems.” Guidance BTSG has revised its revenue and Adjusted EBITDA guidance for the full year 2024 as follows: Revenue: Increased to a range of $11.0 billion to $11.3 billion Adjusted EBITDA: Revised to a range of $580 million to $585 million, reflecting anticipated growth of 14.2% to 15.2% compared to 2023.  Option Care Health, Inc. (NASDAQ: OPCH) Highlights OPCH reported Q3 2024 revenue of $1,278.5 million, a 17% increase from $1,093.0 million in Q3 2023, driven by strong growth in its rare and orphan portfolios and continued expansion in established therapeutic categories.  Gross profit was $256.7 million, or 20.1% of net revenue, up 1.0% from $254.3 million in Q3 2023. Gross profit continues to improve, and spending leverage is strengthening, with SG&A down nearly 1% year-over-year. Adjusted EBITDA reached $115.6 million, reflecting a 5.3% increase from $109.8 million in the same period last year.  While Hurricane Helene impacted operations in the Southeast at the end of Q3, it did not materially affect overall results.  Cash flow generation remains strong, with $160.4 million in cash flow from operations for the quarter. The company ended the quarter with cash balances of $483 million, after deploying approximately $42 million on share repurchases. As CFO Mike Shapiro stated, “We believe the balance sheet has never been stronger, and we remain engaged in a number of acquisition opportunities while continuing to execute our multifaceted capital deployment strategy.” Key Financial Figures M&A Activity In Q2 2024, OPCH repurchased approximately $78 million of its stock. Given the strong momentum in cash flow generation, the company remains focused on deploying capital through M&A and share repurchase strategies. In Q3 2024, the company repurchased an additional $41.9 million of stock. Guidance Option Care Health has updated its financial guidance for the full year 2024, projecting: Revenue: $4.9 billion to $4.95 billion Adjusted EBITDA: $438 million to $443 million. Supply chain disruptions from Hurricane Helene, especially in intravenous solution production, have significantly impacted operations. As a result, the company is currently limited in its ability to onboard new patients, particularly those requiring intravenous antibiotics and nutrition support therapy.  The company expects the supply situation to improve over the coming weeks and months as imports resume and production ramps up at plants and other producers. The updated guidance incorporates the IV bag supply chain disruption. The Company expects that the disruption will negatively impact the fourth quarter financial results and is considered in its updated 2024 guidance. To download the .pdf version of this report, click below.

Unlocking Value: Key Takeaways from Our M&A Webinar On October 16, 2024, Mertz Taggart and Maxwell Healthcare Associates presented the second webinar in a three-part series, diving into how advisors evaluate and enhance the value of home health and hospice agencies. Moderated by Jennifer Maxwell, the discussion featured insights from Cory Mertz, Managing Partner at Mertz Taggart, and Jay Duty, COO at Maxwell Healthcare Associates. Highlights & Key Takeaways Plan Early to Maximize Value:  Cory emphasized the importance of early engagement with advisors, noting that sellers who start planning well in advance can bridge gaps in valuation and improve their market readiness. Focus on Financial Fundamentals:  The speakers underscored critical financial metrics: Revenue matters:   Larger agencies typically command higher multiples. Target margins:  Gross margin should ideally be 45-55% for home health and 50-55% for hospice. EBITDA margins:  Adjusted EBITDA margins between 15-25% for home health and 18-25% for hospice are seen as attractive. Operational Efficiency Drives Value:  Jay highlighted how optimizing intake, scheduling, and revenue cycle management can enhance an agency’s appeal. Addressing workforce management and clinical quality ensures better performance and valuation. Technology is No Longer Optional:  Both panelists agreed that technology plays a crucial role in valuation. Cory noted that EMR compatibility reduces transition risks, while Jay pointed out how advanced tech solutions, such as predictive analytics and workforce management tools, can increase efficiency. Cultural Alignment Can Seal the Deal:  Beyond numbers, buyers look for cultural fit. Cory shared how sellers often choose slightly lower offers from buyers who align with their values and are committed to preserving the agency’s legacy. Final Thoughts Maximizing value in M&A requires early preparation, thorough assessments, and a focus on cultural fit. By addressing financial, operational, and technological factors, agencies can better position themselves for a successful sale. If you are interested in watching the entire Maximizing Value: How Advisors Evaluate Home Health & Hospice Assets webinar, you can find it on our YouTube channel! If you are contemplating an eventual sale of your home-based care agency, feel free to contact us at info@mertztaggart.com  to arrange a confidential discussion about your exit strategy!

The Future of M&A: Key Insights from Our Final Webinar On November 15, 2024, Mertz Taggart and Maxwell Healthcare Associates wrapped up their insightful three-part webinar series with a deep dive into emerging technology trends, strategic innovations, and the evolving landscape of M&A in home health and hospice. Led by Jennifer Maxwell, this session featured expert panelists Cory Mertz, Managing Partner at Mertz Taggart, and Jay Duty, COO at Maxwell Healthcare Associates. Top Highlights & Trends to Watch Tech Integration is Now a Must-Have Jay Duty emphasized, "The integration of technology is no longer a luxury—it’s an operational necessity." He highlighted how advanced tools like AI-driven automation and predictive analytics are reshaping care delivery and improving efficiency. Key trends include: The growing adoption of AI for process optimization  and clinical decision support. Increased use of telehealth and remote patient monitoring  to enhance patient touchpoints and reduce costs. EMR Compatibility and Usage Matter More Than Ever Both panelists agreed that while EMR systems can vary widely, buyers are increasingly focused on how effectively sellers are using them. Cory noted, "The EMR you’re on matters less than how you’re leveraging it. Good data and clean reporting can set your agency apart in a crowded market." Value-Based Care as a Key Driver With 80% of strategic buyers surveyed already implementing value-based care models, Cory explained, "Buyers are no longer just looking for revenue—they want agencies with scalable operations and a proven ability to deliver cost-effective, high-quality care." Leveraging Data for Strategic Growth Jay encouraged agencies to view data as a strategic asset: "Clean, well-managed data helps buyers see your value clearly. It’s not just about operational efficiency—it’s about showing a track record of quality care and outcomes." Private Equity and Strategic Buyers are Evolving The role of private equity is shifting as strategic buyers become more discerning. "The land-grab era is over," said Jay. "Today, it’s about finding well-managed assets with a clear commitment to innovation, clinical quality, and operational efficiency." Final Takeaway As the M&A landscape continues to evolve, the message is clear: technology, data-driven decision-making, and value-based care models will be critical for agencies looking to stand out and maximize value. Early preparation, combined with strategic investments in the right innovations, will be key to positioning for a successful transaction. If you are interested in watching the entire Looking Ahead: Innovation, Technology, and the Future of M&A in Home Health & Hospice webinar, you can find it on our YouTube channel! If you are contemplating an eventual sale of your home-based care agency, feel free to contact us at info@mertztaggart.com  to arrange a confidential discussion about your exit strategy!

Discover the journey behind the sale of For Papa’s Sake Home Care—a story of legacy, family, and commitment to compassionate care. Named in honor of a promise to family, this top-rated agency became a beacon of excellence in senior care. Yet, when it came time to sell, the path was more than a business decision; it was a deeply personal mission. Through the dedication and support of Mertz Taggart, the agency’s founder, Becky Reel , found the right partner to carry on its legacy. Read the full story to see how empathy and expertise came together to honor a lifetime of care. Honoring a Promise and a Legacy For Papa’s Sake Home Care was born from a promise and a mission close to my heart. Named in honor of my grandfather, who I called Papa, who endured a tragic experience in a nursing home, the agency represented our commitment to create a better option for seniors—one rooted in dignity, safety, and genuine care. My promise to my parents was equally important: to build and grow the agency to a point where its sale could fund their fulfilling retirement. Over my 10 years, we grew by 300%, was ranked the number 1 agency in North America by Home Care Pulse (now Activated Insights), and received the Leader of Excellence award for seven consecutive years. Selling this agency was not just about a transaction; it was about finding someone who would continue this legacy of care. Balancing Family, Legacy, and the Demands of the Sale The journey to sell was a long and intensive process. As a mother to two young children and a wife, I still had my day-to-day responsibilities: running the agency, being present with my family, and somehow balancing all this with the intense demands of the sale process. The emotional weight of parting with something so personal was heavy, compounded by the need to maintain the agency’s standards and focus on my family’s needs. Bruce , my advisor from Mertz Taggart, recognized this balancing act and stepped in as more than a business guide; he became my greatest advocate and support system. Empathy and Strategic Expertise Bruce and the Mertz Taggart team brought a unique blend of empathy and strategic acumen to every aspect of the process. Bruce understood that selling our agency was not just about numbers—it was about preserving a legacy. His focus was not only on maximizing the agency’s value but also on finding a buyer who respected the values that built it. He guided me with skill and precision, making complex decisions easier and ensuring I felt confident at each step. Ongoing Support During Critical Moments One of the most telling moments was when a potential buyer arranged a meeting that could determine the future of the agency. The stakes felt high, and I was nervous about facing such a pivotal moment alone. Without hesitation, Bruce booked a flight the very next day to be by my side, offering both his strategic insights and his steadfast support. His presence turned what could have been an overwhelming experience into one where I felt empowered and reassured. Client-Centered for Every Step of the Journey Throughout the 14-month process, Bruce and Mertz Taggart never made me question their commitment to me and my goals. In moments of doubt and exhaustion—when the balance of family, agency responsibilities, and the emotional toll of the sale felt like too much—Bruce reminded me of the impact we had made and the legacy it would leave behind. His encouragement and compassion kept me grounded and helped me see the journey through to the end. A Partner Who Truly Cares Selling For Papa’s Sake Home Care was one of the most significant and emotional decisions of my life. Bruce’s empathy, dedication, and strategic guidance made it possible to honor my promise to my parents while ensuring the agency’s legacy would continue. For anyone considering the sale of a home care agency they’ve poured heart and soul into, Mertz Taggart is more than an M&A firm—they are partners who truly care about their clients’ well-being and success. Conclusion We are delighted to have received this incredibly in-depth testimonial from our client, Becky Reel . It shows us just how much our work means to our clients. Testimonials such as this one motivate us to continue our hard work on bridging the gap between healthcare agency owners and a successful exit strategy, all while maximizing value, minimizing surprises, and keeping our clients in control throughout the process. For similar stories from our other clients, visit our Testimonials page Planning an eventual sale of your healthcare business? Contact us: info@mertztaggart.com To stay up-to-date with our day-to-day activities, follow us on LinkedIn

The healthcare mergers and acquisitions (M&A) marketplace is undergoing a dynamic transformation, driven by shifting industry trends, heightened scrutiny on asset quality, and the strategic pursuit of value-based care. These developments were the focus of our recent webinar series, Home Health & Hospice M&A – Webinar Series , where industry experts shared actionable insights and strategies to navigate today’s M&A environment effectively. Hosted by Jennifer Maxwell , the discussion featured insights from Cory Mertz , managing partner at Mertz Taggart, and Jay Duty , COO at Maxwell Healthcare Associates. The session provided a comprehensive exploration of the latest M&A trends, challenges, and forward-looking opportunities in home health and hospice care. Here are the key takeaways that can shape your approach to M&A in this evolving marketplace. Emerging Trends Shaping Healthcare M&A A Post-Pandemic Reset The COVID-19 pandemic significantly altered the M&A landscape. After a slowdown during the early stages of the pandemic, a surge in transactions followed, fueled by low interest rates and government stimulus. However, rising inflation and higher borrowing costs have shifted priorities. Buyers are now more discerning, focusing on assets with robust financial and operational performance. Increased Demand for Quality Assets Today’s buyers prioritize quality over quantity. Clinical and operational efficiency, data-driven insights, and a clear demonstration of value are critical factors. Sellers must prepare thoroughly, ensuring their businesses meet these elevated standards to stand out in a competitive market. Strategic Considerations for M&A Success Adapting to Consolidation Trends The move toward value-based care is a driving force behind healthcare consolidation. Strategic buyers aim to enhance existing operations and expand service lines through acquisitions that align with their long-term objectives. Optimizing Margins and Metrics Private equity firms are continuing to target high-quality assets with strong margins and scalable operations. As competition intensifies, sellers must ensure their business metrics and processes are optimized to attract top-tier interest. Preparing for Market Success Proactive Operational and Financial Planning Preparation is paramount in today’s M&A environment. Conducting thorough operational assessments, optimizing revenue cycle management, and addressing inefficiencies are critical steps for enhancing valuation. Sellers who invest in readiness build buyer confidence and mitigate transaction risks. Early Exit Strategy Development Successful exits don’t happen overnight. Engaging with M&A advisors and consulting firms well before a potential sale can provide actionable guidance to improve operational metrics and unlock hidden value. Understanding your business’s unique strengths ensures a stronger position during negotiations. Opportunities on the Horizon Data and Technology as Growth Enablers Data collection and analysis are increasingly pivotal. Organizations leveraging patient outcome data can strengthen relationships with payers, ACOs, and Medicare Advantage plans while improving operational efficiency. Service Integration for Value-Based Care Innovative service offerings, such as infusion therapy and physician-at-home care, are becoming essential to building comprehensive care portfolios. Integrating these services into value-based care contracts enhances profitability and market appeal. Key Takeaways for Sellers Plan Ahead : Begin preparing for a sale early. Building operational readiness and addressing inefficiencies takes time but delivers substantial returns. Leverage Expert Guidance : Engage M&A advisors and consultants to maximize asset value and navigate the transaction process effectively. Understand Your Unique Value Proposition : Clearly articulate your market position and competitive advantages to stand out during buyer evaluations. Optimize Financial and Operational Metrics : Ensure strong EBITDA margins and operational efficiencies to attract premium valuations. Looking Ahead With interest rates stabilizing and private equity poised for increased activity, the healthcare M&A marketplace is on the brink of renewed momentum. Organizations that prioritize preparation, operational efficiency, and strategic alignment with market trends will be best positioned to thrive in this competitive landscape. If you are interested in watching the entire Navigating the M&A Landscape: Key Trends and the Role of Advisors webinar, you can find it on our YouTube channel! If you are contemplating an eventual sale of your home-based care agency, feel free to contact us at info@mertztaggart.com to arrange a confidential discussion about your exit strategy!

Adjusted EBITDA is an estimate of the normalized pre-tax cash flow to all providers of capital (debt and equity) for the business. ‘Normalized’ means it is the expected cash flow under normal conditions in the immediate future – it excludes one-time, extraordinary events. Let’s begin by defining EBITDA, which is an acronym for Earnings Before Interest Taxes Depreciation and Amortization. E : Earnings = Revenue minus Cost of Sales minus G&A (General & Administrative) expenses. In other words, net income. B : Before = Illustrates the requirement to exclude or back out certain expenses included in the earnings definition above. I : Interest = Interest paid on debt and interest received. Since the calculation of earnings above includes interest, we will add back interest expenses and subtract interest income. T : Taxes = State and federal income taxes. We will add back state and federal income taxes because another owner may have different tax implications. D : Depreciation = Depreciation expense. This is a non-cash expense. A : Amortization = Amortization expense. Another non-cash expense. Next, we will make the appropriate adjustments to arrive at Adjusted EBITDA. We can group adjustments into four categories: One-time extraordinary income or expenses Business expenses that will not reoccur in the future Non-business-related expenses Personal expenses run through the business that a buyer will no longer incur One-time extraordinary income or expenses include: Gain/loss on sale or disposal of an asset. If it is a gain, then you would subtract it from EBITDA. If it is a loss, then you would add it to EBITDA. Restructuring expenses such as moving expenses, severance packages, etc. Legal expenses – due to a lawsuit Consulting expenses for a specific project Accounting expenses for an audit Non-business-related expenses include: Owner’s compensation relative to fair market. Suppose the owner is the administrator, and has a salary of $225k. Assume the salary market rate for an administrator of an agency with similar characteristics is $100k. The adjustment would add the difference between these two amounts ($125k) to EBITDA. Non-market rent expense. Suppose the agency owner owns the building and leases the office to the business. If the rent charged to the agency is greater than the market rate, then you will add the difference to EBITDA. If it is lower, you will subtract it from EBITDA. Personal expenses include: Owner’s non-business meals and entertainment Owner’s personal auto expenses Owner’s cell phone bill Owner’s non-business travel expenses Family members who are paid by the agency, but who are not necessary for operations Once we have completed the list of adjustments, we add or subtract each to EBITDA to arrive at Adjusted EBITDA. Why is Adjusted EBITDA important, and what is its role in your hospice or home health valuation? It provides a future cash flow estimate for potential acquirers to build their valuation models, specifically discounted cash flow models (DCF). It is the industry standard for valuing home health and hospice agencies, and provides a method for buyers to project their expected cash flow of the agency and the ability to pay for the acquisition. Finally, “the multiple” often quoted in home health and hospice M&A deal announcements is a risk-adjusted number that is applied to the Adjusted EBITDA to determine Total Enterprise Value, or purchase price. For a confidential valuation of your home health or hospice, please email us at info@mertztaggart.com

Deal volume across the behavioral healthcare sector continued to drop in the third quarter of 2024 to levels not seen since the onset of the COVID-19 pandemic. Analysts at Mertz Taggart, however, say all signs point to a major rebound in 2025. Behavioral Health M&A Even when factoring in venture capital growth deals, just 31 behavioral healthcare transactions were announced in Q3. “It’s gotten tougher to get deals done in the second half of this year, and the numbers would certainly reflect that,” Mertz Taggart Managing Partner Kevin Taggart said. “A lot of the strategic buyers are sitting on the sidelines right now with regards to both the mental health side and the addiction side.” In the addiction treatment space, larger strategic buyers could be counted on to complete four or five deals in a quarter. Right now, though, some of those buyers are choosing to sit out, and deals that are getting done are often taking longer to complete in 2024, Taggart said. On the mental health side, deal volume has declined significantly from the halcyon days of 2022, when 42 transactions were reported in the third quarter alone. For comparison, just 19 such deals were announced in Q3 of 2024. “Buyers are becoming much more discerning,” Taggart said. “some of the buyers that are still digesting some of the acquisitions they did over the last couple years are sitting on the sidelines. I'm optimistic that they'll be back in the market. It might not happen until 2025, though.” In becoming more selective, buyers are showing a greater affinity for medical practices than counseling-only businesses. Those that provide other types of services, such as ketamine treatments, for example, mixed in with medical and counseling services are also a plus. “As providers are thinking about what services to offer, medical businesses are getting a premium relative to the counseling-only businesses,” Taggart said. Looking ahead, the degree to which behavioral healthcare transaction volume experiences a resurgence in 2025 could hinge on two factors, Taggart said: Whether the Federal Reserve makes good on its pledge to move forward with a series of rate cuts.  The Fed has made two rate cuts since September, and there is optimism that the cuts will continue in the new year. Whether private equity firms finally tap into their large reserves of dry powder they’ve been waiting to put to use.  “They have to do something with that money eventually,” Taggart said. “And returning it to their GP partners, uninvested, is not what anyone wants.” Addiction Treatment M&A Just six deals involving addiction treatment service providers were announced in Q3, a drop from the 11 reported in each of the prior two quarters.  Deals either completed or announced in the quarter include the following: Aware Recovery Care , a provider of in-home addiction treatment services in 11 states, has raised $3.5 million of new capital in a round led by Connecticut Innovations. Tulip Hill Healthcare announced in August that it has taken a majority ownership stake in two detox facilities: Tennessee Detox Center  and  Live Again Detox to expand its presence in Kentucky and Tennessee. DisposeRx announced a sale of its  Coaches vs Overdoses  program to Pennant LLC . The program was developed by DisposeRx to help combat the opioid crisis by raising awareness, reducing stigma, and empowering high school coaches and athletes to become prevention and recovery advocates. Magnificent Legacy Capital and Legacy Quest Partners acquired Windmill Wellness Ranch  in a private equity platform deal. Bradford Health Services  announced it has acquired Lakeview Health , which operates four programs. The acquisition was backed by Lee Equity Partners. In July, Ethema Health Corporation  announced that it had entered into a letter of intent agreement to purchase all of the assets of Edgewater Recovery Center  of Morehead, Kentucky. Two other deals involving facilities that include addiction treatment among their services offered were also announced: Prairie Ridge South , formerly known as Prairie Ridge Integrated Behavioral Healthcare, merged with Substance Abuse Treatment Unit of Central Iowa . The latter will now operate as Prairie Ridge South. San Angelo, Texas-based Shannon Medical Center acquired River Crest Hospital  from Universal Health Services . River Crest is an 80-bed facility that offers behavioral health and substance use disorder treatment programs for children, adolescents, adults, and military members. Mental Health M&A A total of 19 deals involving mental healthcare providers was announced in Q3, roughly on par with the 18 reported in the prior quarter. Five mental healthcare-focused deals were of the growth funding variety: Pomelo Care raised $46 million for its maternal health platform in a Series B funding round led by venture capital firms First Round Capital and Andreessen Horowitz Bio + Health. Patient-matching platform Headway closed a $100 million funding round led by Spark Capital, bringing its valuation to $2.3 billion. Spring Health , a New York City-based mental health solution for employers and health plans, announced that it raised $100 million in a Series E funding round led by Generation Investment Management, along with participation from existing investors Kinnevik, William K. Warren Foundation, RRE, and Northzone. Mental health chatbot company  Slingshot AI raised a $30 million funding round led by Andreessen Horowitz. BeMe Health , a Miami, Florida-based provider of teen-focused digital mental health services, raised $12.5 million in a Series A funding round led by growth capital investor Hesperia Capital. Other deals included the following: Iredell Health System signed a definitive agreement to acquire Davis Regional Psychiatric Hospital from subsidiaries of Community Health Systems, Inc. Vibrant Emotional Health , a New York-based not-for-profit mental health organization, announced its acquisition of  Stars of HOPE , a program of the New York Says Thank You Foundation. Release Recovery , a New York-based substance use and mental health recovery organization, acquired MANUAL , a personal development and wellbeing platform for young men that is currently available in more than 50 colleges and high schools. Lightyear Capital completed a strategic investment in CuraLinc Healthcare,  a provider of employee assistance, student, and workforce mental health programs. Virtual mental healthcare services provider Uwill acquired competitor Virtual Care Group  in a private equity-backed deal.  Fabric , a healthcare technology and care enablement system, acquired MeMD , a provider of virtual behavioral, urgent, and primary care benefits, from Walmart. Beacon Behavioral Partners , a provider of support services for behavioral healthcare practices, announced its first partnership in Pennsylvania with Nexus Group , a Pittsburgh-based outpatient mental health facility. Neuronetics and Greenbrook TMS  announced in August that they have entered into an agreement for Neuronetics to acquire all outstanding common shares of Greenbrook in an all-stock transaction. Riverside Impact Capital made an investment in Denver Mental Health Collective .  Pneuma Behavioral Health  announced a partnership with Crossroads Counseling Center , a behavioral health practice in Hickory, North Carolina. Autism and Intellectual/Developmental Disabilities M&A Although deal volume remained modest in the subsector of autism and intellectual/developmental disabilities (I/DD), Taggart said he sees potential for a surge in demand among investors for providers of applied behavioral analysis (ABA) therapy in 2025. Factors, such as labor costs, that have created headwinds for ABA companies in recent years have started to settle, and the result could be more deals getting done next year, he said. The following transactions involving autism and I/DD therapy providers were announced in Q3: ABA and autism diagnosis provider  Soar Autism  secured $19.3 million in a funding round. Investors were not disclosed. Autism Testing 4 Kids  raised $2.5 million, with 46 unnamed investors participating in the funding round. Beacon Specialized Living acquired  Community Concepts Inc.  and Community Visions LLC , marking Beacon’s first foray into Virginia. ABA Connect announced its acquisition of ABA Therapy of Houston , giving the company two clinics in Katy, Texas, and a network of 12 clinics across Texas and Colorado overall. Behavioral Framework  of Rockville, Maryland, announced that it has acquired Behavior Consultation & Psychological Services , a provider of clinic-, home-, and school-based ABA therapy and autism diagnosis services in North Carolina. If you are interested, you can also download the Q3 2024 Behavioral Health M&A Report via the following link:

Mertz Taggart follows the publicly traded home-based care companies and reports on their earnings calls each quarter. As a group, public company performance and share price serve as a proxy for industry performance and investor sentiment, respectively. Historically seen as the “ultimate consolidators”, the publicly traded home-based care trading multiples have a downstream effect on lower middle market home-based care M&A. Addus Homecare (Nasdaq: ADUS) Highlights Addus' top-line growth continued with a 10% revenue gain in Q2 2024 vs. Q2 2023, driven by a 57% increase in the Home Health segment, an 11.6% gain in Hospice revenue, and a 7% rise in its Personal Care segment compared to Q2 2023. The revenue increase in the hospice and home health segment was primarily due to the acquisition of the operations of Tennessee Quality Care on August 1, 2023. Admissions and patient days increased in Q2 2024 compared to Q2 2023.  In Q2 2024, ADUS saw a slight increase in gross profit and operating income margins compared to Q1 2024, with gross profit margin rising from 31.4% to 32.5% and operating income margin growing from 8.4% to 9.1%. This increase was driven by higher margins in home health and hospice segments due to the acquisition of the operations of Tennessee Quality Care.  For the three and six months ended June 30, 2024, the company received ARPA funding totaling $2.0 million and $12.2 million, respectively, for supporting caregivers and boosting recruiting and retention efforts. Key Financial Figures M&A Activity On May 21, 2024, the company agreed to sell its New York operations to HCS-Girling for up to $23 million, with the transfer contingent on regulatory approvals. Addus CEO Dirk Allison stated, "We are pleased to divest our New York personal care operations and exit the state, as this challenging market no longer fits our growth strategy.”  Acquisition: On June 8, 2024, the company agreed to purchase the personal care operations of Gentiva (Curo Health Services, LLC) for approximately $350 million in cash, pending regulatory approvals. The acquisition spans seven states and serves approximately 16,000 patients. Addus CEO Dirk Allison stated, “Once this deal is closed, Addus will be the number one provider of personal care services in the state of Texas, which is primarily a managed Medicaid market.” On June 28, 2024, Addus raised $175.6 million through a public offering of 1,725,000 shares at $108.00 each. The company used $81.4 million to repay debt and may allocate the rest for general purposes, including acquisitions like Gentiva's personal care assets.  Guidance For 2024, ADUS anticipates maintaining a stable gross margin percentage; however, ongoing caregiver shortages may potentially impact the levels of service provided. Aveanna Healthcare (Nasdaq: AVAH) Highlights Q2 2024 revenue reached $505.0 million, a $33.0 million (7.0%) increase compared to $471.9 million in Q2 2023. This growth was driven by the following segment performance: Private Duty Services revenue increase by $30.2 million (8.0%), driven by approximately 10.3 million hours of care, reflecting a 4.8% increase in volume compared to the previous year. Medical Solutions revenue increased by $3.6 million (9.3%), while Home Health & Hospice revenue declined $0.8 million (1.4%). Gross margin improved by 1.9% to $158.3 million compared to Q2 2023, reflecting the improved payer rating environment as well as cost reduction efforts taking. Operating income margin improved 9.5%, reaching $37.1 million. The improvement in operating income margin was primarily due to reduced branch and regional administrative expenses (restructuring portions of the branch and regional operating structure). Adjusted EBITDA was $45.6 million, a 27.3% increase as compared to the prior year period.  Demand for home and community-based care remains strong, with governments and managed care organizations seeking solutions to expand capacity. AVAH results show its continued alignment with the objectives of the preferred payers and government partners. Key Financial Figures M&A Activity In Q2 2024, AVAH made no comments on potential acquisitions. The company's current priorities are to improve profitability through organic growth, expand payer partnerships, strategic cost reductions and continue to invest in its caregivers. Guidance The company expects adj. EBITDA to ramp up throughout 2024 as reimbursement rates and caregiver hires increase. The company is looking for continue to leverage their growth through strategic cost reductions and lower overhead while building on the success of our preferred payor strategy and Government Affairs rate improvements. According to Jeff Shaner, CEO of Aveanna, “The labor environment represented the primary challenge that we needed to address to see Aveanna resume the growth trajectory that we believed our company could achieve. It is important to note that our industry does not have a demand problem. The demand for home and community-based care continues to be strong”  2024 full year projections: Full Year 2024 Revenue guidance increased to over $1,985 million. Full Year 2024 Adjusted EBITDA guidance raised to over $158 million.  The Pennant Group, Inc. (Nasdaq: PNTG) Highlights Q2 2024 total revenue reached $168.7 million, up $36.5 million or 27.6% compared to the same quarter last year. The Home Health and Hospice Services segment generated $125.3 million in revenue, marking a $30.3 million increase or 31.9% year-over-year. Adjusted EBITDA for the quarter was $13.2 million, a rise of $3.1 million or 30.6% from the previous year.  Home health admissions totaled 14,140 in Q2 2024, up 3,699 or 35.4% from Q2 2023, while Medicare home health admissions increased by 889 or 18.3% to 5,738. The hospice average daily census grew to 3,220, an increase of 726 or 29.1% year-over-year. Revenue for the Senior Living Services segment reached $43.4 million, up $6.2 million or 16.6% compared to the same quarter last year, supported by a higher occupancy rate and higher average monthly revenue per occupied room. Key Financial Figures M&A Activity Since the beginning of the year, the company expanded its operations with the addition of four home health agencies, two hospice agencies, and three senior living communities. The company also acquired the real estate of two of three senior living communities.  Brent Guerisoli, CEO & Director of PNTG, reported, “In the process, we've added more than 2,200 lives under the Pennant umbrella through acquisitions and organic growth, along with approximately 4,000 lives under the Hartford management agreement. Collectively, this represents a greater than 50% increase in the number of lives we touch each day as compared to the end of 2023. And this does not include the impact of the Signature transaction, which will add an additional 2,500 lives.” On August 1, 2024, The Pennant Group, Inc. announced the successful completion of its acquisition of Signature Healthcare at Home’s assets in Washington and Idaho. Guidance Management updated its annual guidance, projecting total revenue to range from $654.0 million to $694.5 million. Full-year 2024 adjusted EBITDA is expected to be between $50.7 million and $53.8 million. The company’s updated guidance anticipates organic growth, strong operational performance for the remainder of the year, hospice reimbursement rate adjustments, and the contributions from the joint ventures and management agreements.  Enhabit Home Health & Hospice (Nasdaq: EHAB) Highlights Q2 2024 total revenue slightly decreased by 0.6% vs Q2 2023. In the Home Health segment, revenue declined $3.6 million or 1.7%, primarily due to lower Medicare re-certification.  The company’s payer innovation strategy continues to drive non-Medicare growth, with non-Medicare admissions up 25.2%, leading to a total admissions increase of 6.4% year-over-year. Currently, 43% of non-Medicare visits are under payer innovation contracts at improved rates. In the hospice segment, the company has seen consistent progress in census growth, with the average daily census increasing each month since January 2024, resulting in a 2.7% year-over-year increase. The company's focus on recruitment and retention continues to support long-term growth.  This quarter, the company reduced bank debt by $15 million and opened a new home health location in Florida in April. Key Financial Figures M&A Activity EHAB is actively evaluating potential acquisition opportunities but is currently constrained by its credit agreement, which limits its ability to pursue acquisitions due to existing leverage or debt levels. The company remains focused on its long-term goals and is not allowing these short-term limitations to affect its overall strategic outlook. Guidance The company expects home health admissions and hospice volumes to grow in the mid to high single digits annually over the next three years, driven by investments in case management and team development. According to Barb Jacobsmeyer, President & CEO, ”In our Home Health segment, our payer innovation strategy continues to succeed, with our field teams successfully shifting admissions out of historically lower-paying contracts to better paying contracts that recognize our better way to care.”  The company has revised its full-year 2024 guidance: Net Service Revenue: Updated to a range of $1.05 to $1.06 billion, down slightly from the previous forecast of $1.07 to $1.10 billion Adjusted EBITDA is now projected to be between $100 million and $106 million, up from the previous range of $98 million to $110 million. This update reflects improved cost performance, leading to a more refined adjusted EBITDA range. BrightSpring Health Services, Inc. (NASDAQ: BTSG) Highlights Q2 2024 total revenue was $2,730 million, up 26.0% compared to $2,167 million in the second quarter of 2023. Net revenue growth was driven by strong performance in both segments, particularly Specialty and Infusion Pharmacy. Adjusted EBITDA reached $139.1 million, a 17% increase year-over-year, exceeding internal forecasts. Pharmacy Solutions revenue was $2.1 billion, growing 32% compared to the second quarter of last year. The segment growth was driven by ongoing execution supporting specialty product ramp-ups and launches from 2023 to 2024, infusion patient and volume growth and strength in home and community pharmacy volume.  The Provider Services segment generated $616 million in revenue, reflecting an 8% increase compared to Q2 2023. The average daily census in home health care increased 13% year-over-year to 44,246 in the second quarter, while Rehab billable hours increased at a high single-digit rate. The company's success in the second quarter is attributed to its focus on timely, preventative, and coordinated care for seniors and specialty patients in the home and in low-cost settings. Key Financial Figures M&A Activity During the six-month period ending June 30, 2024, BTSG successfully completed four acquisitions in the Pharmacy Solutions and Provider Services segments. The company had entered these transactions to expand their services and geographic offerings. The total aggregate consideration, net of cash acquired, for these acquisitions amounted to approximately $43.9 million. The company is currently evaluating the fair value of the assets acquired and liabilities assumed. The recent acquisitions contributed approximately $15.1 million to the company’s revenue for the second quarter of 2024.  Jon Rousseau, President & CEO, commented, “We've been focused on deals that are very accretive here in the last year in particular that are four times pro forma EBITDA or less typically. And that's really where our focus has been. And we believe we can continue to augment our growth rate through very accretive M&A combined with organic growth to achieve our growth objectives.”  Guidance BTSG has revised its revenue and Adjusted EBITDA guidance for the full year 2024 as follows: Revenue: Increased to a range of $10.45 billion to $10.90 billion. Adjusted EBITDA: Revised to a range of $570 million to $580 million, reflecting anticipated growth of 12% to 14%. Option Care Health, Inc. (NASDAQ: OPCH) Highlights The company’s top-line performance remains strong, with a year-over-year revenue growth of 14.8%. In Q2 2024, OPCH reported net revenue of $1,227.2 million, up from $1,069.1 million in the same quarter of 2023. Growth was well-balanced across the portfolio, with particularly strong performance in the newer limited distribution and rare orphan therapies within the chronic portfolio. Gross profit for the quarter was $249.4 million, or 20.3% of net revenue, compared to $250.8 million, or 23.5% of net revenue, in Q2 2023. Adjusted EBITDA of $108.4 million, down 1.5% compared to $110.1 million in the second quarter of 2023.  The decline in gross profit percentage was primarily due to ongoing supply chain challenges affecting certain drugs and inputs, as well as issues related to the Change Healthcare cyberattack, which disrupted pharmacy operations and led to operational inefficiencies.  The company believes it has effectively resolved supply chain issues by the end of the quarter and has made significant strides in mitigating the impact of the Change Healthcare situation. Additionally, the company has made substantial progress in reducing accounts receivable and accelerating revenue collection during the quarter. Key Financial Figures M&A Activity In the second quarter, the company repurchased approximately $78 million of its stock and intends to continue this focus on share repurchase in the near term. According to Mike Shapiro, CFO, “We remain focused on M&A efforts and continue to assess acquisition opportunities. We have also reengaged on share repurchase activities and repurchased approximately $78 million of stock in the second quarter. Our efforts ramped up as our cash flows improved in the quarter and year-to-date we have repurchased more than $118 million of stock. And given the momentum in cash flow generation, we intend to remain focused on deploying capital through M&A and share repurchase strategies.” Guidance According to Shapiro, “We believe we have effectively resolved the supply chain challenges late in the second quarter… we have made significant progress in recovering from the Change Healthcare situation. SG&A was flat in the quarter as we continued to drive efficiencies through investments in technology and operational excellence. SG&A as a percent of revenue dropped to 12.5%, our lowest ratio on record.” Based on the first half results and the revised expectations, Option Care Health has updated its financial guidance for the full year 2024, projecting: Revenue: $4.75 billion to $4.85 billion Adjusted EBITDA: $435 million to $450 million To download the .pdf version of this report, click below.