M&A Demand Stalls Out In Home Health Care, Declines In Personal Home Care

Coming down from a high the past two years, home-based care M&A saw a bit of slowdown in the third quarter of 2022. That’s according to a recent report from Mertz Taggart.

The report is an overview of the dealmaking activity that took place across home health, home care and hospice in Q3.

The decline in transactions is a result of fewer companies going to market in 2022, compared with 2020 to 2021, Mertz Taggart Managing Partner Cory Mertz said in the report.


“Transaction volume from late 2020 through 2021, relative to historical periods, was up almost 40%,” he said. “This was driven by sellers trying to get their transactions closed before the then-pending capital gains tax rate increase. This never came to fruition, but the threat has loomed since the current administration took office, only subsiding in early 2022.”

Another major factor was the U.S. Centers for Medicare & Medicaid Services (CMS) proposal for the home health payment rule in June. The release of the final rule, in October, has since given the industry more answers, but at the time the proposed payment rule brought M&A to a halt.

Some providers were even strategic about their decision to take a measured wait-and-see approach to M&A activity until the release of the final rule.


Though there has been a downturn, it hasn’t taken as much of a toll on the lower middle market. This means companies that have enterprise values between $3 million and $100 million.

Plus, private equity and strategic buyers are still on the lookout for attractive home health, home care and hospice acquisition targets.

There are a couple of different things that are indicative of the lower values in the public equity markets.

“First, at the higher end of the market, meaning values over $100 million,” Mertz Taggart wrote in the report. “Larger home health and hospice companies that would command mid-to high-teens multiples of EBITDA in 2020 and 2021 are not drawing that level of interest so far in 2022. The exception, of course, is LHC Group’s pending sale to United/Optum, which is a highly strategic acquisition of a publicly traded company.”

Additionally, the demand for private-duty companies has decreased.

“The usual consolidators are seeing demand for private-duty home care services softening across their networks, as individuals paying for these services are feeling the pinch in their financial portfolios, causing them to cut back on their hours,” Mertz said. “However, we are seeing this play out differently, depending on the geographic service area, with the more affluent areas less affected.”

Overall, Q3 saw the completion of 12 home health-related deals, including from companies such as LHC Group Inc. (Nasdaq: LHCG) and Care Advantage.

There were 12 non-medical home care deals during the quarter. Avera@Home and the PE-backed Choice Health at Home are two companies that made acquisitions on the home care side.

In the hospice space, there were 11 deals completed in Q3. H.I.G. Capital’s St. Croix Hospice and Ridgemont Equity-backed Agape Care Group both completed transactions during the quarter.

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