COVID-19 Slows Home-Based PE Activity for Now, But Could Boost Long-Term Interest

The coronavirus has brought the U.S. economy and many of its industries to a screeching halt, so it’s not entirely surprising home health and home care dealmaking is expected to temporarily slow down amid COVID-19.

But what will the pandemic mean for private equity firms, who came into 2020 with a record $1.5 trillion in cash ready to deploy, and their potential home-based care investments?

The outlook somewhat mirrors that of the larger home-based care M&A landscape, experts told Home Health Care News: While investing may slow down or pause in the short term, COVID-19 shouldn’t have a detrimental long-term impact.


In fact, if anything, interest in the space could increase in a post-coronavirus world.

“You’ve got the ultimate infection control procedures in place if you’re keeping some vulnerable adults at home and segregated from others,” Ari Markenson, co-chair of the health and life sciences industry group at Winston & Strawn, told HHCN. “But certainly — and this is a trend even irrespective of the outbreak — we’re going to see more home- and community-based services, period.”

Chicago-based Winston & Strawn is a global law firm that frequently represents home-based care agencies in transactional and regulatory matters. Meanwhile, Markenson has personally been involved in nearly 75% of the middle-market private equity deals in home health over the past 15 years.


On one hand, PE firms are reevaluating their portfolios overall in attempt to make the smartest investments possible during such tumultuous times, he said. Additionally, a number of provider clients have temporarily put deals on hold simply because they have more pressing matters to attend to.

Neither fact is surprising nor alarming, in Markenson’s view.

“In fact, in every case I’ve heard of, the pause is just simply a pause,” he said. “It’s not that we’re not going to do a deal. It’s simply that, for right now, we’re on hold.”

Haley Beck, investment professional at Alpine Investors, agreed: This is all temporary.

“Every business is having to adapt, and that takes time, effort, thought and, often, capital,” Beck told HHCN. “Adapting is the No. 1 priority for businesses, while raising investments from private equity are coming second to keeping people safe.”

Alpine is a San Francisco-based PE firm that’s leaned into home-based care investments, especially in recent years.

In October, Alpine’s portfolio company TEAM Services Group bought Philadelphia-based AmeriBest Home Care; In May, it acquired Minneapolis, Minnesota-based Circle of Life Home Care Anishinaabe Inc.; and the list goes on.

Alpine Investors plans to continue to be active in home-based care, even in light of COVID-19.

“We’re fortunate to have businesses in our portfolio with access to existing financing sources, which allows us to continue doing deals during this difficult time,” Beck said. “Our interest remains in completing those investments and, in many situations, providing capital and financing to companies who really need it right now.”

Alpine isn’t the only PE player in that position.

At least two home-based PE deals have been announced since March 30 alone.

Webster Equity-backed Bristol Hospice announced its acquisition of Sojourn Hospice & Palliative Care, and Nashville, Tennessee-based PE firm Council Capital invested in Physician Housecalls, an Oklahoma-based company that provides home-based primary care services.

While neither Beck nor Markenson could speculate how long the PE slowdown might last, both shared optimistic long-term outlooks.

“The focus right now for all companies is preserving liquidity, managing cash and creating needed optionality to weather the storm,” Beck said. “But in the long-term, private equity will still be interested in high-quality, home health care businesses that are serving their patients and employees in a responsible way as the need for such critical services are not going away.”

In fact, COVID-19 could even increase interest in home-based care, Markenson hypothesized.

“One of the things you saw in the CARES Act is an influx of dollars going into additional workforce training, and that is going to benefit post-acute care providers,” Markenson said. “You may even end up seeing them have the ability to expand services and to invest more in the space as a result of all of that.”

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