M&A Experts ‘Can’t Recall a Time When Demand Has Been Higher’ in Sizzling In-Home Care Market

M&A activity across home health, hospice and in-home care appeared to be “business as usual” at the start of 2020. COVID-19 froze the market in March, however, causing both buyers and sellers to bide their time.

But dealmaking action is finally starting to heat up again, multiple M&A experts confirmed to Home Health Care News.

In the past few weeks alone, for example, Charter Health Care Group announced its purchases of Vitality Home Healthcare and Heartwood Home Health & Hospice. Meanwhile, Bridges Health Services announced a series of mergers with various home health and hospice providers. Most recently, Chicago-based private equity firm the Vistria Group agreed to sell St. Croix Hospice to an affiliate of investment company HIG Capital.


To get a better understanding of the developing M&A market, HHCN asked several experts to provide insight into what they are currently seeing in the final months of 2020. They also touched on 2021 expectations.

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I’ve been selling home health agencies since 2006, and can’t recall a time when demand has been higher. Since July, we have received more calls from both strategic and financial buyers looking for home health than I can ever recall in a three- or four-month period.


While hospice M&A has dominated the spotlight these past couple years, home health M&A has cooled off. The uncertainty of the Patient-Driven Groupings Model (PDGM) caused both the strategic and financial buyers to hold off on any significant home health investments until after dust settled on the overhaul. We expected buyers would be ready to engage in the second quarter of 2020, but COVID-19 delayed that by a couple months in April and May.

With the public companies, which are the ultimate consolidators, the long-term strategy remains the same. They want to have all three legs of the stool: home health, hospice and personal care. And they want that in each of the markets they serve. As a practical matter, most of these companies are really focused on filling out the skilled side first. As recently as three years ago, most of these strategic buyers had a significantly larger home health presence than hospice. That has changed.

As a result of the aforementioned hospice M&A activity and a lot of denovos, many of these strategic buyers are now shifting their attention back to penetrating new markets via home health acquisition, which they will then complement with hospice and at some point, plus personal care.

My crystal ball is clouded somewhat with an election less than a month away and a threat of another significant COVID outbreak, but I’m going to go out on a limb and speculate we will see near-record — if not record — home health M&A activity between Q4 2020 and Q1 2021.

— Cory Mertz, managing partner at Mertz Taggart

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In order to provide an appropriate context to understand how 2021 is setting up, we must first look back to this time last year. There was a mixed level of excitement regarding the forecasted 2020 home health merger and hospice acquisition marketplace.

Home health owners were facing PDGM implementation with certain uncertainty. Hospice owners were enjoying uncounted unsolicited calls and emails from buyers asking for “just a few minutes of their time.” A tale of two cities!

Since mid-March, the COVID pandemic “tripped the breaker” on scheduled and intended home health and hospice deals — or did it? Data researched and compiled exclusively by The Braff Group may come as a surprise to some.

Home Health’s expectation for a “down” year appears to be on track as expected; 42 projected deals vs. 60 transactions in 2019. Similarly, during the past five years, we’ve documented 296 completed deals; averaging just under 60 per year.

Looking ahead to 2021, home health will start off slow but pick up greater deal activity as the year unfolds, especially for mid- and larger-size agencies.

There are several reasons for this. Sellers, as well as buyers, will be well past the initial shock of dealing with COVID-19 and have settled into new daily norms and routines. While we have not completely recovered, many agencies have returned to pre-COVID levels of activity. Once preoccupied within their own portfolio companies, private equity firms now are back aggressively looking to build up their pipelines and line-up deals to get done. By many indicators, home health, and especially hospice valuations remain at all-time highs.

— Mark Kulik, managing director at The Braff Group

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I do believe we will continue to see in-home care M&A acquisitions pick up. I believe that dual-service-line providers will continue to get more traction in the market. Hospice continues to be a valuable target for both strategic and sponsor buyers. We believe that home health-only agencies will continue to be challenged with admissions and the PDGM RAP reductions in cash flow.

According to a survey by the National Association for Home Care & Hospice (NAHC), almost 80% of home health agencies have experienced a decline in admissions due to the pandemic, with a majority of agencies reporting a decline of greater than 15%. Although elective procedures and routine visits are beginning to open up across the U.S., we are still seeing agencies struggle with therapy-heavy episodes and facility-based patient admissions. With the decrease in admissions, timing for presenting the company to buyers may cause them some reservations until the agency has proven stabilization related to admissions and Low Utilization Payment Adjustments (LUPAs).

In regard to the future of dealmaking in this space, agencies with both home health care, private duty and hospice service lines will be more eye-catching to potential buyers. Diversification of service lines will remain attractive.

— Tom Maxwell, co-CEO at Maxwell Healthcare Associates

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With the onslaught of the COVID-19 pandemic in early March, it quickly became pretty clear that M&A activity generally, as well as with in-home care, was going to slow down significantly through the balance of Q1 and likely until the middle part of Q2. We thought we would begin to see an uptick in deal activity around mid-June and after, and that assessment has more or less turned out to be accurate.

While business travel and group meetings have continued to be on-hold for many, sourcing deals, discussions among transactional parties, diligence and other deal-related activity has adapted to the new “normal” through virtual meetings, conference calls and increased use of outside support such as law firms like ourselves and other industry transactional advisors and consultants.

Since mid-June, we have seen a marked increase in “deal talk” among sellers, buyers, bankers, investors and lenders both in home care and hospice, and we are currently working on a number of home care and hospice transactions across the country.

As transaction parties have begun to understand better some of the COVID-19 related factors and issues and their impact on deals, valuations have stabilized and in some cases increased. We expect to see a continuing surge of deals as both PE and strategic players seek to add bolt-on transactions in their markets and additional platforms where available.

Capital remains generally available to acquirors, and both home care and hospice are being seen as more stable health care verticals with the ability to give patients an alternative environment to group settings like hospitals and nursing homes. That is an additional important consideration to patients and payers in this COVID-19 era.

In sum, all indications are that absent a systemic disruption, home care and hospice deal activity should continue to be active through 2020 and well into 2021.

— Les Levinson, co-chair of the national health care transactions practice at Robinson & Cole LLP

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At the onset of the coronavirus pandemic, there was uncertainty of the impact of the virus across all sectors of the health care industry. The practicalities of country-wide lockdowns, coupled with high-risk patients who were reluctant to allow providers into their homes, led to weaker performance for in-home health care companies. For companies that qualified, government stimulus in the form of Paycheck Protection Program (PPP) loans alleviated cash flow concerns and allowed many providers to weather the storm. As a result, M&A activity slowed and deal activity was put on hold.

We are eight months into the pandemic, and M&A activity has accelerated. Transactions that were on hold are ramping up. Valuations are strong. Buyers are becoming more active as additional investment opportunities arise, and the upcoming U.S. presidential election seems to be motivating dealmakers to close deals before the end of the year.

In-home health as a “buy-and-build” strategy is attractive to investors as the sub-segment is highly fragmented. Buyers executing a consolidation strategy backed by a scalable platform for growth and supported by strong processes and systems, along with a well thought-out integration plan for acquisitions to achieve synergies, should experience robust investment returns.

— Claudine Cohen, managing principal, transactions and turnaround advisory at CohnReznick

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It is a sobering truth that if you follow the money, you usually find the answer, or at least the motivation. Currently, investors are deploying massive amounts of capital to acquire home care agencies. The interest is at record levels. The money is telling us that we’re on the threshold of a golden age for home-based care. The growth of home care will be of great benefit to the patients. Let’s hope this growth trend continues.

— Andre Ulloa, principal at American Healthcare Capital

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