The past year in hospice M&A has 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. Of course, Covid-19 hit and changed our world dramatically. The one thing it didn't do is change the valuations on hospices.
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.
As if the stress of a pandemic isn't enough to contend with!! Our friends in home health spent much of 2019 getting ready for PDGM and it's effective date of January 1st, 2020. Even the largest players in the industry weren't sure the exact impact that PDGM would have on thier businesses. Of course, there were various models and many consultants that would give you a good idea of what may happen. The proof is always in the pudding.
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.
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 see interest in acquisitions picking back up again as we emerge from the health crisis.