Mergers and acquisitions across the segments of home care, home health and hospice slumped in the first quarter of 2023, according to a new report by M&A advisory firm Mertz Taggart.
The three healthcare subsectors recorded 14 deals in the first three months of the year — half as many as the same periods in 2022 and 2021.
“There are fewer quality targets on the market,” Mertz Taggart Managing Partner Cory Mertz said in the report. “If you ask the buyer universe, they’ll tell you they are seeing a lot of opportunities, but most of them are not quality — whether financially, clinically or both.”
According to the report, home care racked up the most deals with nine transactions, followed by hospice with five and home health with three. Some of the transactions included more than one business line. The largest deal to close by far during the quarter was UnitedHealth Group’s acquisition of LHC Group for $5.4 billion.
The drop in the number of acquisitions — after three consecutive years of brisk buying by private equity groups and corporations — didn’t come as a complete surprise. Last month, M&A experts, including Mertz, told McKnight’s Home Care Daily Pulse they expected the first quarter to tally fewer deals than the past several quarters. Anxiety over rising interest rates, along with concerns over the financial stability of the U.S. banking system following a spate of recent bankruptcies, were putting the brakes on transactions.
Mertz wrote economic uncertainty had led to speculation that valuations would plummet for some, but not all home care, home health and hospice agencies.
“In fact, given that buyers are looking for quality opportunities — and not ‘fixer-uppers’ — strong home-based care sellers remain in high demand,” Mertz wrote. “That’s especially the case in the lower end of the market, which would be considered any seller below $50 million in enterprise value.”
Indeed, some larger providers reaffirmed their commitment to growing through acquisitions in recent months. Addus Homecare CEO Dirk Allison told Wall Street analysts last month his firm was still on the hunt for home health and personal care businesses.
Mertz predicted home health deals could pick up steam later in the year, saying it is the only subsector “that can actually contribute to global savings for the healthcare system at large.” He also predicted that interest in home care would continue to be robust due to strong interest in home -and community-based services as older adults increasingly choose to age in place.
