Colorful graph going up, depicting home care mergers

Non-medical home care helped lead the home care sector to a record year of deal-making in 2021, experts in the field say.

There were at least 166 home health, hospice and home care transactions last year, an 8% increase compared to 153 in 2020, M&A advisory firm Mertz Taggart said in its fourth-quarter mergers and acquisitions report released Thursday. The 2021 fourth quarter saw 49 transactions, a figure that was slightly higher than the average of the past five quarters, the company said.

Home care helped to fuel the M&A growth, the firm said. There were 19 home care-related transactions that year. That capped a year in which home care transactions nearly equaled hospice and exceeded home health. In the two previous years, home care lagged behind both, according to the report.

“Of the three sub-sectors, home care has gained the most steam over the past 12 months, with a record 70 transactions announced, which doesn’t include individual franchisee transactions,” Managing Partner Cory Mertz said. “That’s an 84% increase compared to 38 transactions in 2020.”

Pandemic push

Brian Bruenderman and Tom Lillis of Stoneridge Partners, a healthcare mergers and acquisitions advisory firm that specializes in home care, said that the pandemic helped to reveal the value of home care. A lot of the transactions over the last two years switched to home care and hospice, and policymakers in Washington came to realize the “best care” for a patient was in the home, they noted.

“It accelerated a lot of perceptions that may have been coming around glacially,” Lillis said during a Thursday webinar hosted by the National Association for Home Care & Hospice.

Two notable transactions last year were Wellspring Capital Management’s purchase of Caring Brands International and Aveanna Healthcare Holding Inc.’s purchase of Accredited Home Care.

Deal-making in home care franchises was especially significant in 2021, Mertz Taggart said. One of these was Honor Technology’s acquisition of Home Instead.

M&A activity also was strong in 2021 for home health and hospice, Mertz Taggart said. There were a total of 62 home health transactions in 2021. That included 15 in the 2021 fourth quarter. Hospice experienced a robust 74 transactions last year, including 23 in the last quarter.

Looking ahead

Deal volume may slow this first quarter of 2022 and for the rest of year with interest rate increases likely, the Mertz Taggart report said.

“This can certainly put a damper on values, which can, in turn, slow deal volume,” Mertz wrote.

A change in reimbursement rates and how buyers will react to agency-level metrics in advance of the 2023 expansion of Home Health Value-Based Purchasing program also could be factors, he said.

But Bruenderman and Lillis so far don’t see the market slowing. While there was a mad rush to close deals at the end of 2021 due to a fear of a tax on unrealized capital gains, it hasn’t put a damper on deal-making.

“I assumed there’d be some slowdown going into this year. There hasn’t been,” Bruenderman said.

A potential interest rate hike also may not change the climate, Lillis said. “It will raise costs somewhat, but it will not snuff out the market,” he said during the webinar.