Amid Financial Market Turmoil, Big Players Look To Smaller, High-Quality Home Health Agencies To Grow

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The drop in transaction volume at the high end of the home health market has cleared an interesting path for smaller standalone agencies.

Investment experts are seeing strong demand and valuations for mom-and-pops, and those smaller providers are seeing it themselves.

“The private equity platform companies that planned to exit over the last year and a half have not been able to exit because, at the high end of the market, values have come down,” Cory Mertz told Home Health Care News. “Those guys are actively looking for transactions because they need to continue to grow, and the way they’re going to do that is through add-on acquisitions.”


At the high end of the market — or deals in the $100 million to $1 billion range — transaction volume has come down due to capital becoming more expensive, among other reasons. Transactions at that end tend to be more highly leveraged, so the space is seeing fewer large transactions.

Those economic factors could potentially have a positive effect on smaller agencies looking to sell within the next few years.

“I see it as a pretty active market,” Kevin Colman, president and CEO of Home Healthcare Solutions Company, told HHCN. “It may be a little bit slower as we speak today just because of the overall financial environment and with interest rates a little bit higher, but I’ve been approached by a couple of private equity firms in the past who have expressed interest. I’ve decided not to go that route right now, but when the time calls for it down the road, we’d certainly be open to it when we’re ready to exit.”


Home Healthcare Solutions Company is a Chicago-based home health provider that handles an average of 60 to 80 admissions every month.

“I’m very bullish on the market because the home health industry isn’t going away,” Colman continued. “Everything is moving to the home. And at the end of the day, Medicare home health is still probably the only federal Medicare program out there that actually saves the program money. As long as that’s the case, people are going to want to be in this industry from an owner/operator and a private equity standpoint.”

Mertz defines the “low end” of the market as deals between $3 million and $50 million, but it’s an unscientific range.

“We will not see a lot of transactions with multiples in the mid-to high-teens right now,” Mertz said. “But the lower end of the market is holding up fine. I can make the case that values for companies in this size range are higher today than before interest rates started to rise.”

The value of home health care is clearly recognized by the largest health care companies in the country, including the largest payers and retailers.

But smaller agencies may have a harder time expressing the value they provide, given a lack of resources to do so.

“In this environment, the more services you’re able to provide and the more you’re able to make your agency a one-stop shop to provide that continuity of care, the better off you’ll be,” Colman said. “I’m really as bullish as ever. I think COVID flushed a lot of the weaker players out who couldn’t get the staff and I think that’s actually kind of made it better for the agencies that were able to stick around.”

Companies that prove they have versatility and a strong financial foundation will be what pique investor interest. Profitability becomes even more imperative when margins are tight, Mertz said.

“I talk to buyers all the time, and right now they tell me, ‘We’re seeing a lot of deals, but really nothing of any quality,’” Mertz said. “There’s a real scarcity of quality opportunities out there for these private equity-backed – and even the publicly traded – companies to really sink their teeth into.”

There’s still plenty of interest in smaller home health companies that are performing well.

Over the next three to five years, Accurate Home Care hopes to be one of those companies. Accurate is a Minnesota-based home care and home health provider that operates in half of the state’s 87 counties.

“We initially came in to be the turnaround firm because this thing was within, easily, a couple of weeks of bankruptcy,” Bill English, president and CEO of Accurate Home Care, told HHCN. “We stepped in as a majority owner on Jan. 1 of 2018 and in the first month, we lost $536,000 on $2 million of revenue. By January 2020, we were profitable.”

Two months later, COVID-19 hit and Accurate lost 30% of its nurses. Today, the company is profitable and healthy, with English having to right-size the business twice in five years.

English, also a partner with the consulting firm Platinum Group, believes the right exit will be there in the near-term future.

“I don’t know that it’s not a fruitful market right now, I’m just not sure we’re a good buy right now,” English said. “Most companies don’t want to buy headaches and we’re just emerging from a migraine.”

In another year or two — maybe three — English believes that will change, especially for a buyer who doesn’t have a footprint in Minnesota. Accurate Home Care has a versatility that is tough to come by, he said.

“We’re in 43 of the 87 counties in Minnesota and we’re looking to expand,” he said. “We have a unique service line. There aren’t a lot of companies that do non-medical, plus private-duty nursing, plus home health.”

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