The Riverside Company, a New York-based private equity firm with more than $5 billion in assets under management, has made its first play in the home care space, investing in Bloomfield Hills, Michigan-based franchisor ComForCare.
“This is our first home care franchisor, but franchise investment is a specialization of Riverside,” Steve Rice, a principal with the company, told Home Health Care News. “We’ve played in home care through software acquisitions, and this is our first home care provider investment, but it’s a market we’ve been following and chasing for a number of years. ComForCare was the first to hit all our criteria, and when we found it, we absolutely sprinted.”
Riverside is not disclosing the acquisition price. ComForCare founder and CEO Mark Armstrong will continue to lead the company and maintains a “significant stake,” Rice said.
ComForCare brought in about $8.8 million in total revenue in 2016, according to the company’s franchise disclosure document. It has about 200 franchise locations across the United States, as well as in Canada and the United Kingdom.
While it has a large footprint, ComForCare has been very strategic in its growth since its founding in 1996, and this was one of the factors that attracted Riverside, Rice said.
“It’s a very healthy system because they’ve been very conscious of their growth,” he said. “This is not [a company] that just finds someone to sell every territory to, they find people committed to their business practices. This has led to strong organic growth within the system.”
At the same time, there still is room to more than double the number of territories the system covers, meaning there is massive organic growth potential, he said.
Riverside intends to support ComForCare’s growth in several ways. One is by beefing up the marketing side with an eye toward more online lead generation through a robust online presence.
“It’s so important to be Google-able,” Rice noted.
Given the ongoing staffing crunch the industry faces, having more resources to put toward hiring and training initiatives is also a key benefit that should come from the Riverside investment, he said.
Private equity investment in home care hit a peak in 2016, and these deals are continuing into this year. Rice is well aware that Riverside is not alone is seeing a ripe opportunity in the home care space, given the demographics of an aging society, which should drive huge demand for personal care services.
“We think franchisors are best positioned to capture growth in this market,” he said. “This is a very local marketing business. That’s why the franchise model works so well, with local owners knocking on doors.”
At the same time, ongoing consolidation across the health care spectrum could create exit opportunities for PE firms down the road, as health care systems, hospitals, post-acute providers, or senior living companies might be looking to control more of the continuum. And private equity players might also move toward ownership over these various system components.
“When you look at the broad range of services that the older population will need, being the home care provider is a good entry point,” Rice said. “One day, they might need a referral to a facility, they might need more skilled care, they might need help moving or modifying their home. All these types of services I can imagine [investing in] through organic growth or add-on [acquisitions].”
ComForCare also recently made headlines for its DementiaWise training program, which received recognition from the Alzheimer’s Association. The DementiaWise program is just one example of how ComForCare is distinguishing itself in an increasingly competitive home care marketplace, Rice said.
“Nothing should change from an operations perspective,” he said. “On the margin, we’re bringing more capital resources, so there’s more appetite to invest in and improve the offering.”
Written by Tim Mullaney