Home health nurse looks lovingly at senior while they look at book

An eager supply of sellers drove mergers and acquisitions for home care, home health care and hospice in the third quarter of 2021, according to a new report from M&A advisory firm Mertz Taggart. With hospice claiming the lion’s share of the deals, the industry as a whole tallied 44 completed deals in the quarter that ended Sept. 30 — three more than the previous three-month period and the strongest quarter since the final months of 2020.

Cory Mertz

“All three sub-industries remain strong, but the increased activity has little to do with increased demand,” Mertz Taggart Managing Partner Cory Mertz said in the report. “Demand has been strong for several quarters and continues. This is a supply-driven market.”

Mertz attributed the robust supply to providers wanting to exit the market before a possible increase in the capital gains tax, the expansion of value-based purchasing for home healthcare providers to all 50 states, and the continued impact of the COVID-19 pandemic. 

“We’ve heard from many owners who are feeling a sense of burnout,” Mertz said. “Maybe they were already thinking about a sale in the next couple of years, but then the ongoing pandemic just accelerated their timelines.”

Hospice led the hot M&A market, followed by home care and home healthcare. Although private equity investors were in control of the buying binge in the third quarter, large, established firms played a pivotal part in home health deals during that period.  LHC Group acquired Cavelier Healthcare Services, and Amedisys bought Iowa and Nebraska-based nonprofit Visiting Nurses Association.

Mertz noted a number of franchise-related deals dominated the home care sector in the quarter. Among the biggest deals were Honor Technology’s acquisition of Home Instead and ModivCare’s purchase of CareFinder’s Total Care. 

“That brings the total number of franchisors who have sold in 2021 to four, compared to just three in the previous five years,” Mertz said. “Franchisors give financial buyers both immediate scale, which can be leveraged, and the ability to quickly grow EBITDA via acquisition of both existing franchisees and independents.”

To date in 2021, the industry has completed 104 deals, just 39 short of the 143 deals completed during the entire 2020 calendar year.