Although rising interest rates and inflationary pressures could have some companies tapping the breaks on acquisitions, the Pennant Group is proceeding full speed ahead. During an earnings call with Wall Street analysts on Tuesday, Pennant Group Chairman and CEO Daniel Walker said the company is having ongoing discussions with potential sellers of home care and hospice agencies.
“It’s always difficult to predict what those conversations will look like for the next 12 months; we see signs that they will continue to be strong,” Walker said. “We are excited to continue our historical acquisition pace in our home health and hospice segment in particular where we have strength. While we don’t have any quotas or targets for how we deploy our capital, we feel really good and feel really optimistic about continuing to grow there.”
On Monday, Idaho-based Pennant Group beat Wall Street first quarter estimates by $0.03. The company earned $0.11 a share on revenues of $113.91 million for the quarter. That compares to $0.11 on revenues of $105.66 million during the same period a year ago. Pennant Group President Brent Guerisoli said the nearly dozen acquisitions the company made in 2020 helped boost profits more than 50% during the quarter. Last year the company acquired five home health and hospice agencies and announced its first deal of 2022 with the purchase of Bozeman, MT-based First Choice Home Health.
Transactions on track
M&A activity got off to a rocky start this year for the home care and hospice industry. According to M&A advisory firm Mertz Taggart, home care and hospice deals declined 50% in the first quarter compared to the same time last year. But Walker told analysts during the call that hasn’t translated into a “seismic shift” in home care and hospice valuations due to buyer anxiety over inflationary pressures.
“There might be some softness in bigger deals or elsewhere in the landscape, but we continue to see what we call pretty fair valuation as sellers consider both our offers, as well as their other priorities,” Walker said.
Home as safe bet
Mark Thomas, co-founder and partner of M&A Healthcare Advisors, agreed with Walker’s assessment. Thomas said current valuations continue to be in line with last year’s because buyers and investors continue to see home care as a safe bet.
“We have witnessed an increased demand from patients to heal in the safety of their own home, fueled by COVID-19, which has solidified the value and future of in-home care service businesses,” Thomas told McKnight’s Home Care Daily Pulse in an email.
Thomas said interest from private equity groups in home care and hospice has only increased in recent months. That could prompt firms, such as Pennant, to turn up the heat on the acquisition efforts.
Read more coverage pertaining to the Pennant Group’s first quarter earnings.
