Nova Leap Health Corp. (TSXV: NLH) has completed its acquisition of a Massachusetts home care company for $1.2 million, on the heels of raising about $1 million through a brokered private placement of shares. Nova Scotia, Canada-based Nova Leap Health will use the proceeds of the private placement to fund its growing portfolio of home care companies, which it plans to eventually consolidate under a single brand name.
Nova Leap went public in 2016, raising $5.7 million from inception with 46% inside ownership, according to a corporate presentation. The company is solely focused on investing in private-pay non-medical and skilled home health care companies, making acquisitions in rural areas in the Northeastern United States and Eastern Canada, CEO Chris Dobbin told Home Health Care News. It is targeting companies with $1 million to $5 million in revenue, with positive EBITDA.
In addition to being a founding shareholder of Nova Leap Health, Dobbin is co-owner and director of Earth Angels Living Assistance, one of the largest privately held home care companies in Nova Scotia. He started Nova Leap Health to be a consolidator within the highly fragmented personal care industry.
“My idea was that we could bring a consistency to the level of service and focus on specialized training around dementia especially, and do that with a geographical focus,” he told HHCN.
Earlier this month, Nova Leap Health announced that it would sell up to about 13.3 million common shares through a private placement led by Haywood Securities and Gravitas Securities, for gross proceeds of up to $4 million. The first tranche of this private placement has now closed, for gross proceeds of about $1 million Canadian, or about 796,000 U.S. dollars, the company announced April 13. Nova Leap expects the second and final tranche of the offering to be completed on or before April 30.
Proceeds will be used to fund recent acquisitions, as well as for working capital and general corporate purposes.
Rather than relying on private equity or venture capital to get Nova Leap off the ground, the public market was a preferred option for several reasons, Dobbin said. He did not want the company’s timelines for growth to be defined by the life of a fund, and he wanted to give investors the opportunity to move in and out of the stock as they saw fit. He also has ambitious plans for expansion and wants access to the public markets for financing.
As of February 2018, Nova Leap Health had a portfolio of four companies. In March, it announced the acquisition of the home care company in Massachusetts, Home Health Solutions, with a workforce of 75 people and current revenue of $1.9 million. On April 3, it announced the acquisition of a private home care services company located in Eastern Canada, for $2.1 million. That company has a workforce of 150 people and current revenue of $2.42 million.
The Home Health Solutions deal has now closed, for the previously announced amount of $1.2 million, Nova Leap Health and Mertz Taggart, the sell-side M&A advisor, announced Monday.
Nova Leap should exceed a $10 million run-rate in 2018, Dobbin said, more than doubling its rate from 2017. The goal is to double its run-rate again in 2019. Deal flow has been strong and he does not anticipate any slowdown in the near term.
“There are lots of opportunities within New England and the Northeast in particular,” Dobbin said. So far, deals have come together mainly because current owners have reached retirement, he said.
The acquired companies have maintained their existing brand names, which are familiar in the local communities. However, there are plans to roll out a unified brand, with that announcement likely occurring over the next quarter, Dobbin said.
While sticking to the Eastern seaboard, Nova Leap Health does stretch across the U.S.-Canada border. This does not present too many complications, given that the private-pay revenue model holds across the two countries. In the States, Nova Leap does accept some long-term care insurance and Veterans Affairs benefits, and it is also actively considering possible opportunities to be reimbursed through Medicare Advantage in the future. These will likely continue to be just ancillary revenue streams, though.
“We like the private pay space, and that’s our focus,” Dobbin emphasized. “I don’t see us deviating.”
Operational models are also similar in both countries, with personal care at the heart, bolstered by investments that Nova Leap Health is making to systematize and improve marketing, hiring, and other processes.
“At the end of the day, it comes down a basic level of personal service,” Dobbin said. “At its core, people helping other people.”
Nova Leap Health is making its play as consolidation is taking hold across the sector, including in the Northeast. Amedisys (Nasdaq: AMED), one of largest Medicare-certified home health providers in the United States, has ventured into non-medical personal care through acquisitions in Massachusetts.
Meanwhile, large providers like Dallas-based Encompass Health (NYSE: EHC) are scooping up acquisitions to build out their continuum of care in markets across the country. Private equity firms are investing largely in franchise-based personal care providers and aiming to expand their footprint through acquisitions. And major mergers are also transforming the landscape, including the combination of Almost Family and LHC Group (Nasdaq: LHCG) and, just last week, the three-way merger of private equity-backed Jordan Health Services, Great Lakes Caring and National Home Health Care.
Written by Tim Mullaney