Home health, home care and hospice M&A was historically high in 2021, with high valuations serving sellers and solid return on investment serving buyers. Transactions plummeted after that, but recent signs suggest M&A is beginning to pick back up across sectors.

“Rewinding to 2021, we had a historically active market with valuations as high as anyone had ever seen,” Rebecca Springer, lead healthcare analyst at Pitchbook, told Home Health Care News in a recent webinar. “We’ve come down in health care services deal activity by about 50%. After that peak, 2024 has been cautiously ticking back up.”

Seattle-based Pitchbook is a resource for comprehensive data, research and insights spanning the global capital markets.

Deals have been made at significantly lower valuations than in 2021, and buyers and sellers have had trouble bridging the valuation gap in recent years, according to Springer. Additionally, the first quarter of 2023 witnessed the second-largest banking failure in the industry, coinciding with pronounced interest rate increases. However, commercial banks have reentered the scene, and that’s considered positive for the second half of 2024 and the first half of 2025.

“Coming out of COVID, I think you saw a lot of impact on earnings, in some areas positive and in some areas negative,” Bob Dunn, managing director of GF Data, said on the webinar. “We have some momentum in the market. But that high propensity for add-ons and larger firms shopping down market has made an interesting marketplace. More wind is in the sails going into the second half of 2024.”

Based in Chicago, GF Data provides valuation data on private-equity-sponsored middle market transactions through quarterly reports and a comprehensive online valuation database.

Transactions have yet to return to pre-pandemic levels. Home health, home care and hospice reached 156 transactions in 2019, but are projected to see only 105 this year, according to Mark Kulik, senior managing director of home health, home care and hospice at The Braff Group.

The Braff Group, headquartered in Pittsburgh, is an M&A advisory firm specializing in health care services.

Kulik pointed to a positive sign for 2025: aging Americans with businesses.

“We have a historically large population of older Americans, many with businesses,” he said on the webinar. “I think the desire to exit will have an impact on deal volume. In 2025, you’ll see a fairly robust market in terms of activity.”

Sellers should expect questions about employee retention, the company’s track record of growth after M&A and whether their leadership has done due diligence before entering the race.

“Knowing the questions that are going to be asked and knowing you have the answers to those questions is of the utmost importance,” Dunn said.

Experts predict that large, founder-led home health and hospice businesses will be in high demand in the coming year. Larger home care companies, especially those that are Medicaid-funded, will also be in demand. In addition, pediatrics has come back into focus for buyers. Tangential businesses such as home infusion, pharma services and long-term care staffing are expected to see an uptick in transactions as well.

“Everything is lining up and pointing in the direction of an active 12 to 18 months coming up,” Kulik said. “If you’re thinking of exiting, the next 12 to 18 months is a good time to do it. Get your business prepared. But, pause to get your house in order before you decide to go to market.”