Home Health Acquisition Prices Keep Climbing

The number of home health mergers and acquisitions dipped in the first quarter of 2015 compared to a year prior, but a trend of high deal values continued to hold strong.

The first three months of this year saw 16 mergers and acquisitions of home health and hospice companies, compared with 19 in the first quarter of 2014, according to recently published data from accounting and consulting firm PricewaterhouseCoopers. However, at $139 million, the published deal value for the most recent quarter more than doubled from the same period in 2014.

Extendicare Inc.’s $83 million acquisition of Revera Home Health in January accounted for the lion’s share of the total deal value. While that deal involved Canadian operations, big-ticket deals also have been occurring in the United States.

Recent “marquee deals” include Kindred Healthcare’s $1.8 billion acquisition of Gentiva Health Services Inc., and HealthSouth Corp.’s $750 million acquisition of Encompass Home Health and Hospice. While these mega-deals are especially eye-catching, valuations generally are up, says Mark Kulik, managing director at The Braff Group, a health care M&A company specializing in home health, among other areas.

“Anecdotally, valuations have been up in the last 18 months, certainly by a turn or two of EBITDA,” Kulik tells HHCN. “You’ve got a relatively calm legislative environment, low cost of capital, and you’ve got more solid agencies out there that have proven themselves, generating stronger valuations accepted by the buyers.”

Another notable deal that occurred in the first quarter was Almost Family’s acquisition of WillCare Healthcare for $50 million. The acquisition came on the heels the largest purchase in Almost Family history—a $75.5 million deal to buy SunCrest HealthCare.

Other large home health providers in the United States also are positioning themselves to be more active in mergers and acquisitions. Baton Rouge, La.-based Amedisys has gotten its once-troubled balance sheet in order and is considering expanding beyond its current 37 state footprint, recently installed President and CEO Paul Kusserow said in March.

And after “record activity” on the development front to start 2015, Lafayette, La.-based LHC Group currently has a pipeline of 39 acquisitions being evaluated, although these are of the “smaller size” that the company typically has undertaken, its co-founder, Chairman and CEO Keith Myers said on a recent earnings call.

Written by Tim Mullaney