This article is sponsored by The Braff Group. In this Voices interview, Home Health Care News sits down with Kris Novak, Managing Director, The Braff Group, to talk about the greatest drivers of value in a home-based care transaction, and the steps providers can take to best prepare their organization for a sale. He discusses the key factors owners and operators should weigh during a sale in today’s operating environment. He also provides insight into Braff’s role in supporting and positioning their clients to optimize performance and value.
Home Health Care News: What life and career experiences do you most draw from, in your role today?
Kris Novak: Professionally, my experience with Amedisys ultimately led to my role with Braff. There, I oversaw the M&A, integration, and start-up teams during a period of significant activity and successful closings. I have assessed hundreds, if not thousands, of home health, hospice, home care and other related opportunities. I’ve also participated in discussions with the C-suite and board of directors regarding valuation, risk and strategy, which allowed me to see the fundamental reasons why deals were approved or not approved.
Personally, witnessing the exceptional care provided in patients’ homes, including for my own family members, has enabled me to recognize the deeply personal and mission-driven nature of this work for so many caregivers. It’s work I could never do myself, and it’s truly an honor to help our clients find a buyer that aligns with their objectives.
How does a home-based care organization determine the right time to sell?
To maximize value, there are always a few key factors to consider. The current growth stage of the business, the level of sustainability of that growth, and the current market environment are all critical considerations. Every deal has unique factors that could impact timing or desire to sell, which can vary drastically depending on the ownership type.
For a founder-owned for-profit or private equity-backed organization, owners generally want to sell when the business is entering a strong but mature growth phase. If a home health provider is growing same-store volumes at, say, 20% or more, buyers typically won’t give full credit for continuing that high pace of growth. In other words, buyers often view extremely high growth rates as unsustainable and will usually undervalue the business in such scenarios.
Conversely, a company growing below market rates or even declining typically doesn’t maximize value because buyers see it as a distressed situation. They may burden the company with additional costs to stabilize the growth profile or pay a lower multiple to account for the risk of reigniting growth. It’s about finding that mature growth phase and timing the market as best as possible, unless other unique factors come into consideration for the individual or the organization.
How should owners prepare their organization and leadership team for a sale?
It’s imperative to consider an exit strategy early, and the leadership team is critical to the stability of the business during and after the sale. As far as leadership is concerned, bench depth always reduces risk for a buyer and can also excite buyers about future expansion opportunities.
If buyers perceive a business as highly dependent on the owner, it elevates their risk assessment and can ultimately reduce value. Whether their perception is fair or unfair. There are certainly cases where an owner’s objective is to stay on and roll meaningful equity while continuing to lead and grow the business. Regardless of the individual owner’s objective, it’s important to identify and develop key leaders prior to a sales process. It’s the right thing to do for any business, at any time.
More stability and talent reduce risk if someone leaves or an owner decides to step back and focus on strategic initiatives or other growth opportunities. As with anything performance-related, it is not uncommon for deal-savvy organizations to offer some form of incentive, whether that be equity or a change-of-control bonus, to align their leadership teams with the exit strategy. This incentivizes them to build value and ultimately complete a successful transaction through transition.
What are the key components of value in a home-based care transaction?
There are multiple components of value, depending on the objectives of each client. Cash at closing is always the headline, and it is important to everyone selling their company. After that, however, we work to understand each client’s objectives and align the best buyer to meet those goals.
For example, one owner may want to take a majority of their risk off the table while retaining a minority interest or a leadership position — another owner may want to exit completely. Private equity might be the right buyer for organizations with scale, infrastructure and talent, to provide flexibility and achieve the owner’s objectives. The right partner can also be an asset going forward, offering access to capital markets or advising in areas such as IT, recruiting, or quality assurance to capture growth or implement necessary investments. In this scenario, the owner continues to benefit economically on the next transaction because they’ve retained a minority interest.
We have also seen increased deal volume on the not-for-profit side. These organizations often have similar objectives regarding employees, quality of care and access to care. They may also want to ensure buyers are committed to serving the less fortunate or continuing to operate or fund ancillary service lines such as Meals on Wheels, mother-baby programs, or school nursing programs. We recognize the unique needs in scenarios where a not-for-profit is divesting operations to protect the longevity of access to care while the purchase price funds expansion of fiduciary duties and mission within their community.
How does Braff support its clients in positioning their organizations to create that value?
We work with our clients to showcase their organizations. At the Braff Group, we take pride in our specialized approach. We are not generalists across all health care service segments. I spend 100% of my time focusing on home care, drawing on my experience in this area. Our other managing directors concentrate on their areas of expertise, such as behavioral health, staffing, and Home Medical Equipment. This specialization is the main reason I joined Braff — it allows me to focus solely on home care.
I’ve built my career and network around home care for the last 15 years. I understand the importance of the services the industry provides to our aging population. We have a deep appreciation for home care delivery, operational processes, regulations, reimbursement, and the evolving buyer universe. Leveraging this experience, we work with many clients for 6 to 12 months before going to market. Preparation is key. It drives the highest level of ROI for owners, and we are committed to achieving the best possible outcome for them.
In our preparation, we analyze financials, key performance metrics, growth initiatives, as well as clinical outcomes and compliance. Each of these factors can drive a higher multiple in the market. A typical exercise involves recasting financials to account for one-time or preparatory expenses. For example, if an owner has $50,000 in one-time expenses, that can significantly impact value on an 8x multiple, potentially worth $400,000. Our holistic approach is proven to achieve premium value for our clients, and we take pride in delivering those outcomes.
Why should owners and operators monitor M&A trends, even if they’re not focused on selling today?
Simply put — value. It may sound a bit self-serving, but we genuinely mean it. Owners and Investors should use us as a thought partner. If Buyers are looking for specific trends in a business — such as infrastructure, growth dynamics, outcomes, compliance and metrics — doesn’t that reflect what a strong and healthy organization should look like? Even if an owner or board is not considering a sale, they likely want their business to operate at the highest level. This translates to performance, which should, in turn, translate to cash flow. You can then take that cash flow and reinvest it in your staff, IT, other acquisitions, or startups. We’re also happy to discuss how to best allocate those resources.
Finish this sentence: “In the home-based care industry, the next 12 months will be defined by…”
… a high level of investor interest — both strategic and private equity.
We will see an increasing volume of announced transactions with the potential for a robust M&A market in 2025 once we see an interest rate cut, the Home Health final rule, and the presidential election results.
Editor’s note: This interview has been edited for length and clarity.
The Braff Group is a mergers and acquisitions advisory firm specializing exclusively in health care services including behavioral health, home health, home care and hospice, health care staffing services, home medical equipment, pharmacy services and ancillary health care services. To learn more, visit https://thebraffgroup.com/market-sectors/home-health-hospice/.
The Voices Series is a sponsored content program featuring leading executives discussing trends, topics and more shaping their industry in a question-and-answer format. For more information on Voices, please contact [email protected].
