The past 18 months in hospice M&A have been nothing short of phenomenal. Valuations since the Summer of 2019 have continued to rise. More specifically, a rather sharp ascent took place during the last part of 2019 and into early 2020. We had a brief pause in the 2nd Quarter; only to continue to ascend the rest of 2020 and now into 2021.
Regional and national hospices are looking for expansion targets. Private Equity (PE) is leading the charge even if it may not be apparent at face value. Behind so many growing hospices you will find a PE firm.
We have strong relationships with Buyers throughout the country. This enables us to properly match our Sellers with the acquisition target that best suits their agency. It's not just the obvious of maximizing the initial Letter of Intent Price. We want our Sellers to close at their LOI price with the best terms and conditions possible for their particular situation.
The old saying is that "timing is everything in life". Our friends in home health probably find it pertinent.
1/1/2020: PDGM became effective
1/1/2021: RAPS were eliminated.
Covid-19 not only caused unprecedented havoc from a clinical operations perspective, it made the evaluation of the impact on PDGM near impossible. Further complicating the situation were the government programs of PPP and the Cares ACT. While the cash infusions may have been welcomed, it begs the question of what will the agency look like when the funds run out? As you would expect, there are a multitude of opinions on this one with some of the "majors" saying now the smaller firms will finally stumble right out of business.
Attention all Home Health Agency Owners: when you sell your business any government funds from 2020 such as PPP will not be included in your valuation. They are not sources of revenue for continuing operations.
While there will always be some agencies exiting the industry, we are more bullish on the forecast for the industry. The pandemic has shown the value of providing care in the home better than we could have ever imagined. The opportunities to utilize telehealth are better than ever. We have seen interest in acquisitions picking back up again as we emerge from the health crisis.