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Home care providers looking to grow need to follow meticulous planning and have realistic goals. Failure to follow that guidance could mean serious operational challenges down the road.
During the public health emergency, when more attention was being paid to alternative settings for long-term care, the home care industry saw record-breaking volume and valuations.
Seeing an opportunity for rapid growth, some providers started to scale at a rate that — in certain cases — was too aggresive.
Others have found a happy medium, the ability to grow quickly without sacrificing operational steadiness.
“There’s nothing wrong with staying a small agency,” Chris Dobbin, president and CEO of Nova Leap, told Home Health Care News. “But for those that truly want to grow, I think you have to determine what that means for your company. As an owner, you have to determine first what your vision for the company is.”
The Halifax, Nova Scotia-based Nova Leap deals exclusively in private-pay home care. It operates in 10 states, as well as its home province in Canada.
When Dobbin started the company in 2016, annual revenue clocked in at $40,000. Six years later, in 2022, that number was $28 million.
Nova Leap completed at least eight acquisitions from the start of 2017 through June of 2019, making it one of the more aggressive individual home care buyers at the time. On average, Nova Leap made about four acquisitions per year up until 2021.
The company’s growth strategy was simple: focus on smaller, high-quality deals with vetted providers.
“M&A, as a strategy, is inherently risky,” Dobbin said. “We’ve been careful not to take on deals that are too big for us given our size. Generally speaking, as you grow, you can take on bigger deals because the risk profile remains similar.”
Regardless of the risk profile, providers can often overlook the integration process when trying to grow too quickly.
“I think the biggest lesson that a lot of these folks have learned is that we can underestimate the integration piece,” Mertz Taggart Managing Partner Cory Mertz told HHCN. “It starts with culture, and there needs to be alignment there. I think the providers that have had issues have done too many deals, too fast, and they didn’t have the resources to properly integrate.”
While Nova Leap continued its accelerated growth strategy, Dobbin never felt like the plan was too much, too soon.
One of the reasons was because of the due diligence he and the rest of his staff did before making those deals.
“For us, when we’re looking at these companies, we want to understand who is in the office, what does their operating team looks like, and what will the core team be once an owner who is looking to retire is no longer there?” Dobbin said. “That’s all really important to us because we look to elevate somebody within that office to take on more of a leadership role. I’d say we do that about 75% of the time.”
The success Nova Leap has been able to have is, in large part, due to the relationships that are built before a deal is made.
“One of the barriers that we often see is the owners of these businesses are often so far down in the weeds to where it doesn’t allow for a situation for them to grow beyond their current location,” Dobbin said. “For owners that can delegate more responsibility to assistant staff and start thinking more strategically about the business — I think those owners have a greater chance of expansion.”
Beginning the growth process
Other providers in the earlier stages of their growth journeys are finding similar success with Nova Leap’s general growth principles.
“We are about to hit seven months since we launched,” Avid Health at Home CEO Jen Lentz told HHCN. “In those seven months, we’ve completed and fully integrated three acquisitions to create the baseline that is Avid. That, of course, came with the trials and tribulations of quick growth. However, I think what made us very successful is that going into closing that first acquisition in May, we had a baseline of where we knew everything needed to feed into.”
The Havencrest Capital Management-backed Avid Health at Home was unveiled in early August. It was created in conjunction with Havencrest’s acquisition of For Papa’s Sake Home Care, which is a personal home care provider in the Chicagoland area.
Avid’s growth plan has been aggressive from the outset. In early October, it acquired Well Care Health’s personal care business. In late October, it acquired Independence 4 Seniors, a home care agency based in the Chicagoland area.
Lentz said one of the main focuses has been to effectively merge policies and procedures in a way that’s organized and feasible for everyone involved.
“Things like our EHR, payroll system, back office procedures, our own operational manuals, job descriptions and expectations for data,” she said. “All of that was outlined before we closed. When we were going through this quick roll-up, what made it successful was that we were able to gather this information and put it into our process, which made it very easy to transition the employees — both field and admin — into a new day-to-day operating model.”
Home care, Lentz reiterated, is a direct care business made up mostly of caregivers.
“Putting employees first is probably the biggest part of our culture that we prioritize,” Lentz said. “We are really focused on putting our employees first because, without them, there is no growth and there is nothing to manage. It’s nerve-wracking enough to change jobs. To change jobs where it wasn’t you who made the decision but somebody else — in this case your employer — it’s scary. So we really focused on making sure that that was something that we could mitigate and support our employees through three different types of transitions.”
Nova Leap made three acquisitions in two weeks at the end of December in 2021. Since then, it has yet to make another acquisition.
In the time since, Dobbin said the lack of dealmaking has been an asset.
“Because of the impact that COVID had on our business, we ended up focusing on the business and working on operations as opposed to M&A,” Dobbin said. “That focus on operations has been extremely valuable to us. It’s allowed us to produce — from a financial perspective — record results. We’re just coming off of two of our best quarters and we have no long-term debt.”
After a relatively quiet two years, Dobbin said the plan for 2024 is to get back into the M&A game and close on a few deals in the next year.
As for Avid, the plan is to keep the foot on the gas pedal in the near future.
“I love that no matter how much you plan, you always get that unexpected twist at the end [of a deal],” Lentz said. “It keeps it exciting. From an investor perspective, we’re still on the right track of supporting the home care industry, trying to really thrive in being a disruptor in the sense of how we provide services, how we expect to be contracted, how we expect to be reimbursed and ultimately how we as an employer should be expected to pay our caregivers. So it’s all positive.”