Homewatch CareGivers Harnesses Private Equity Capital to Shine in Hyper-Competitive Market

Under Julie Smith’s leadership, Homewatch CareGivers has transformed from being a family owned home care franchisor to being backed by private equity — but that only tells part of the story. The company — which encompasses more than 190 locations — was acquired by Authority Brands, a portfolio company of PNC Riverarch Capital, in 2017, through a transaction that set an industry-record EBITDA multiple. Homewatch CareGivers again traded in 2018 and now is owned by London-based Apax Partners, the 14th-largest private equity firm in the world, as ranked by Private Equity International.

In leading Homewatch CareGivers through this period of change, Smith has drawn on skills honed across several industries, including retail, technology and education. She is focused on building scalable systems and positioning Homewatch CareGivers’ franchises for success as the home care landscape changes. Medicare Advantage is one area where Smith sees opportunities. She’s also aware that with an “irrational market” at the moment, private equity money is flooding the sector and raising the stakes in an already hyper-competitive business, she said during a recent interview for Home Health Care News’ Disrupt podcast.

Subscribe to Disrupt via Apple Podcasts, Google Play Music, SoundCloud or your favorite podcast app.


Below are some highlights of Smith’s comments, edited for length and clarity:

HHCN: Can you talk about your early career?

Smith: I actually started my career when I was 9 years old, believe it or not. I was working in a mailing room in Phoenix. I wanted to get my mom a Christmas present, but I didn’t have any money … So I wandered and found this job making 75 cents an hour, and ended up cutting my teeth as a capitalist early on.


I made my way more to traditional retail. I worked for a company that was eventually acquired by The Sunglass Hut … retail was fantastic for me. Retail and food service are something that I wish everybody would take a part in early in their career. It really deepened my roots in customer service and process management. It’s a significant and healthy dose of humility, I believe, for those who are working in those industries, and being part of those service sectors and grounded in the service of others I think really helps people be more patient and understanding.

Then I had stints in technology, the home furnishings industry and the international travel and tourism industry. My early career was classic for Gen X. I’d stay for a few years … help an organization build value, make contributions, but I always needed change and growth in my youth, and I got that. It was the basis for an adaptability, if you will. Working in a broad variety of industries helped me develop what I refer to as intellectual adaptability, to bring all of that experience forward as I advanced in my career.

And you went on to the education sector, with Alta Colleges and The Princeton Review?

Alta Colleges was proprietary education. So, similar to the University of Phoenix, but smaller. That’s where I began managing the shared services. We had about 5,000 employees, so in addition to managing online and on-the-ground educational institutions, I managed the shared services, human resources, purchasing, real estate for about 5,000 employees and 3,500 units across the country.

… The Princeton Review is one of the great education brands … they provided college education test preparation to over 100,000 students in 14 countries at that time … I had an an employee base of about 10,000 employees delivering services to students across that broad geography. It helped hone my focus on scalable systems and building commercial value, because The Princeton Review was a publicly traded company. That was my first time moving into that domain.

How did you make the leap into home care in 2015?

A recruiter found me. Interestingly enough, I’d never heard of the sector. I certainly knew about home health care, but like many people in society, I didn’t know about home care. My brother and I were taking care of our 82-year-old mother at that time, both of us living remotely, and we were really desperate for the services of home care. I didn’t know there were companies that could help with activities of daily living … she was falling and we were anxious … the recruiter introduced me to the [Sauer] family — it was family ownership at that time — I learned more about the fundamentals of the industry.

Where was the company when you came on board? Was PE ownership already in the cards?

If I can take you back to 2015, the family had been in the business for 40 years. Paul Sauer was really one of the founders of the industry, in my mind. And when they asked me to join, they were not thinking about an exit. They were thinking about scaling, building scalable systems, and really moving the business to that next phrase of growth.

I was the first person who joined in the leadership capacity outside of the family. Once I got in here and took a look at the hyper-competitive model and the capitalization that was going to be needed for us to really compete, and the fact that the founder was a little bit later in the stage of his career here, it really made a lot of sense to exit the family. They were willing to invest, but investment brings risk, and it just didn’t make a lot of sense. So, we went through an exit and we set the record multiple for the industry, which is a wonderful piece of validation for the family and, I think, a big, important recognition of the type of brand equity that they had built over the years. Becoming CEO was the next logical step in my career here at Homewatch CareGivers.

What was the multiple, can you tell me?

No, I can’t share it with you, but I can tell you that we have actually sold twice in one year, if you can imagine it. The market is a little bit irrational right now, but our network pro forma has been outstanding. Our first private equity owner was PNC Riverarch Capital, and we were part of the Authority Brands concept. It really has been a great experience. Now, we’re owned by Apax Partners, which is the 14th-largest private equity firm in the world. They own great consumer brands such as Cole Haan and Tommy Hilfiger. So we’re very excited about this next wave of growth for us.

It seems like such a momentous change to go from being family-owned to going through two private equity sales. I imagine you’ve been managing through a lot of change.

You’re exactly right. It’s probably one of the more significant transitions that I’ve led, is to go from a 40-year-old family business to one owned by the 14th-largest private equity firm in the world. But what I find helps is that you anchor into your organizational values and mission.

We’ve been fortunate in that our values are the same values as our private equity owners. As people ask me often, what is it like working for private equity, well, not all private equity is created equal. So we have gotten folks that want to drive value for every constituent that touches our business, which is part of my focus and key values … So when you look at finding a private equity firm, when we dealt with change, all of our conversations have been about, number one, we have great franchise owners and they were excited to see the family exit, to see that they did so well, because at some point they will sell, and they’re trading on the same brand equity, strong fundamentals. So, people have been very optimistic.

So, now the conversation changes to what does this mean to me, how is this going to benefit me in my local market? And so, leading through that change has not only been about the values but showing them point-by-point over the last year how their businesses have been benefited by the change in ownership and recapitalization. And it doesn’t hurt that our growth right now is outpacing the industry. As a results-focused executive, we don’t do everything perfectly, but right now I think we’re performing strongly under our new ownership, and I think our franchise owners are a big reason why.

There’s been so much private equity investment in home care over the last few years, what’s behind that?

At a high level, this is a perfect industry for private equity ownership, in my opinion, and there’s only a couple brands left that are not private-equity owned. It’s hyper-competitive, it’s hyper-local, you really need a strong capital base to be able to compete. You’re competing not only for clients and referral sources but you’re competing for caregivers … for home care companies, we have to formalize our footing within the continuum of care and that takes investment, that takes leverage, and so I do believe it’s a perfect space for private equity. Especially when you see those fundamentals of 10,000 people turning 65 years of age every single day.

… Typically, a private equity hold will be anywhere from three to seven years. This was a shorter hold for us but the results were there, our owner was able to exit because there are just a lot of money in the marketplace right now, and private equity going to that market is a little bit irrational. Private equity needs to invest. They need strong investment in strong sectors with strong executive officers, that will eventually lead to their exit. So, it is unusual to have a one-year hold, but it makes sense in conjunction with the marketplace, the industry and our results. But I won’t mind it that Apax holds onto us for a few more years. It’s a lot to go through due diligence twice in one year.

I spoke with you soon after the announcement that Medicare Advantage would be allowed to cover non-skilled, in-home care starting in 2019. You were bullish on the MA opportunity then, are you still?

It’s an exciting time. I’m still bullish … it was and still is an important policy recognition of home care. I spoke at your Summit in Chicago alongside the executives of Amedisys and Humana, and all of us were speaking about how instrumental home care has been and is becoming, and the importance of reducing hospital re-admits … we’re the eyes and ears of the home when family members are not there, and reducing those hospital re-admits is really one of the great opportunities around home care.

So I felt and I still feel that the opportunity around Medicare Advantage is a big policy recognition of this, and I’m really excited about what it’s going to bring to our sector. As you know, there’s just a little bit of guidance trickling out, and we’re still waiting to hear from everybody. Anthem was one of the first out and shared some of the services that will be covered, but we’re still waiting on rates, for example.

As a word of pause, I was disheartened to hear that one [insurance] provider may require folks in our sector to be Medicare-certified, even though CMS is not requiring that. I was really disheartened to hear that that may come along with one of the providers. So I would caution and hope everybody recognizes that home care is somewhat unencumbered by deep regulatory requirements. Let’s keep us there. It’s very important for our innovation, for us to be adaptable to the needs of family members, and to weave in alongside home care or hospice partners, so my hope is that there will not be limitations to keep most home care players out there from joining. But … this is the right direction, and I think a couple years from now, we will see home care really having a stronger footing within the continuum, and I expect, as rates roll out, it’s going to bring dramatic changes to our sector.

Companies featured in this article: