The home health, home care and hospice industries are barely exhibiting signs of life when it comes to M&A, sans a few active companies. Transactions were again historically low in the first quarter.
Overall, only 12 total home-based care deals have been reported from the first quarter, according to data provided by the M&A firm Mertz Taggart.
Cory Mertz, managing partner at Mertz Taggart, told Home Health Care News that this is not due to decreased demand in the space, however.
From a macro perspective, interest rates and geopolitical conflict have inhibited dealmaking. From a micro perspective, the Medicaid home- and community-based services industry has been waiting on the Medicaid Access rule, and the Medicare-certified home health industry has been hit by rate cuts and increased Medicare Advantage (MA) penetration.
But there are other factors involved, too. Mertz said that there is a lack of quality assets going to market, perhaps because sellers are waiting for multiples to return closer to 2020 and 2021 levels.
While Mertz doesn’t see multiples getting that high again any time soon, he does believe the market will continue recovering this year and further out into the future.
Plus, on the other end, buyers have become more disciplined. Deals have become harder to close.
In the first quarter, there were six home health deals, six home care deals and four hospice deals. Some of the 12 deals were across multiple service lines, which is why what looks like a 16-deal total is really just 12.
Mertz still expects deal activity to pick up toward the back end of the year.
PurposeCare stays busy
Of the 12 deals completed in the first quarter, the growing home-based care provider PurposeCare was responsible for three of them.
The Chicago-based company – like other providers that have stayed active during an M&A down period – has found ways to creatively get deals done.
It provides all three service lines – home care, home health and hospice – and plans to layer them on top of each other in all of its markets.
“Our goal is to create a continuum of care, primarily leading with home care on the non-skilled side, then supplementing with home health care,” Cameron Cordts, corporate development manager for PurposeCare, said at Home Health Care News’ Capital + Strategy Conference earlier this month.
In the quarter, PurposeCare acquired Michiana Home Care, A-Abiding Care and Queen City Skilled Care. Those providers spanned the three service lines.
“I do feel like that gap between expectation and what buyers are willing to pay has come closer – considerably,” Cordts said.
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