Home-based care M&A volume finished strong in 2023, with dealmaking led by over a dozen non-medical home care transactions. The strong finish sets up 2024 to potentially be a more active year for buyers and sellers, assuming an improved macro-level economic outlook.
Overall, the fourth quarter saw at least 25 transactions across all home-based care sub-sectors, according to a recent report from M&A advisory firm Mertz Taggart.
Of the 13 home care transactions that took place in the fourth quarter, nine involved home- and community-based services (HCBS) sellers. Sodexo also completed its sale of Comfort Keepers — one of the country’s largest home care franchises — to The Halifax Group.
“We just love the [home care] space and wanted to continue to be active there,” Halifax Managing Partner Scott Plumridge previously told Home Health Care News.
In 2023, there were at least 95 total home-based care transactions, a 14% decrease from 2022 and a significant drop from the robust market in 2021.
The recent slowdown, Mertz Taggart reports, can be partially attributed to the Federal Reserve’s efforts against inflation — leading to rising interest rates and tighter debt markets. The idea is reflected in the fact that nearly all other corners of health care also saw a slowdown, particularly in terms of private equity-driven M&A.
“We are seeing signs of a thaw in dealmaking,” Cory Mertz, managing partner at Mertz Taggart, said in the report. “We expect more companies to go to market in 2024 — reverting back to pre-COVID levels — but it will continue to be a bit more of a challenge to get deals across the finish line as buyers will continue to chant the ‘discipline’ mantra.’ But the first and second quarter of 2024 will be better indicators.”
Despite the overall decline, the fourth quarter saw an increase in deals across home health, home care and hospice with private equity driving 18 out of 25 transactions.
Home health care dealmaking ended the year on a high note with 13 transactions completed, up from just four transactions in Q3.
The headliner was Gentiva’s $710 million acquisition of ProMedica’s home health and hospice assets. It was Gentiva’s first major deal following its formation out of the divested assets of Kindred at Home.
While a massive surge in activity in 2024 is uncertain, the industry is poised for potential normalization in private equity-driven activity, Mertz wrote. The outcome largely hinges on the Federal Reserve’s decisions on interest rates and the consensus opinion on future meetings.
“Health care services M&A is hard to predict due to both economic and regulatory uncertainty — and 2024 presents its fair share of challenges on both fronts,” Mertz said in the report. “Health care-savvy investors who are used to navigating these obstacles are chomping at the bit for quality opportunities. Finding and closing those deals will be the bottleneck for activity in 2024.”