Home Health M&A Deal Volume Continues to Decline

Publicly announced home health and hospice M&A activity has hit its lowest level in years, dropping by 40% to a mere nine transactions in the second quarter of 2017, as compared to first-quarter performance of 15 acquisitions.

These second quarter numbers illustrate a continued decline in M&A activity for the industry sector, as M&A activity was also down in the first quarter of 2017.

Further, in a year-over-year analysis, the dip in mergers and acquisitions in the sector for the second quarter of 2017 is 31% below the number of acquisitions made in the second quarter 2016, according to research conducted by Irving Levin Associates.

Of the nine publicly announced mergers and acquisitions, the largest based on revenue was the acquisition of New Mexico-based Option Home Care—a local provider generating $20 million in annual revenue—by Texas-based Addus HomeCare (Nasdaq: ADUS) in May 2017. Others in the mix include the acquisition of Knoxville-based East Tennessee Personal Care Services by Baton Rouge, Louisiana-based Amedysis Inc. (Nasdaq: AMED); the acquisition price was not disclosed.

The less-than-stellar numbers from the first and second quarter of the year counter the sector’s overall M&A performance in 2016, which saw a growing interest from private equity investment firms in home care and hospice, according to research by The Braff Group.

Investors may be hesitant to pursue M&A opportunities in the home health and hospice sector, as a cloud of uncertainty continues to linger over Medicare and Medicaid reimbursement, explains Lisa Phillips of Irving Levin Associates.

Written by Carlo Calma