What the $1.1B Enhabit Deal Signals for Home Health M&A

Two years after Enhabit investors called for a sale and the company began a strategic review, the provider has sealed a deal to be sold to private equity firm Kinderhook Industries.

At $1.1 billion, the all-cash transaction equates to $13.80 a share with roughly a 10x implied multiple to estimated 2026 earnings, according to a note from Jefferies analysts. They believe this should satisfy investors.

In a statement emailed to me on Monday, Enhabit CEO Barb Jacobsmeyer emphasized that the company would not change its day-to-day operations or its strategy.

“Enhabit intends to continue operating as it does today, with the same leadership, strategy and commitment to our employees and communities,” Jacobsmeyer wrote. “We do not anticipate any material changes to our day-to-day operations, team structure or the way we serve patients as a result of this transaction.”

One leadership change is upcoming, however: Jacobsmeyer in August 2025 announced that she would be stepping down in July 2026 or upon appointment of her successor.

Needless to say, the company is about to enter a new chapter, but Jacobsmeyer’s comments about a stable strategic direction highlight the progress that Enhabit has made in stabilizing the business following its rocky start, after spinning off from Encompass in 2022. The deal also highlights other industry trends, including the roles of diversification – in particular the value of a margin-protecting hospice service line – and the continued transition to value-based care.

In this week’s exclusive, members-only HHCN+ Update, I’ll share my predictions for what the Enhabit/Kinderhook deal means, offering analysis and key takeaways, including:

– The short-term implications for Enhabit

– Kinderhook’s background in home health and value-based care

– What the deal foretells about dealmaking in the industry

Enhabiting a new ownership model

The sale will enable the company to push dramatically on its value-based arrangements, partnerships, technology stack and acquisitive growth, according to a conversation I had with Joe Widmar, director of mergers and acquisitions at West Monroe.

These pushes won’t represent a radical change in the company’s operating model, but the speed at which the company can execute these goals is set to accelerate without the weight of a public stock market on its back.

To start with the “acquisitive growth” outlook, Kinderhook’s past involvement in the home health industry paints a picture of what we can expect with its Enhabit investment.

“We believe deeply in [the home health/hospice] model, and our track record proves it,” Michalik told me. “Home health has been a core area of focus for Kinderhook for decades. The firm has successfully invested in and scaled multiple home health platforms by emphasizing clinical quality, patient experience and clinician engagement.”

One example of Kinderhook’s home health background is its investment in Florida-based Trilogy Home Healthcare, which it sold to CenterWell Home Health in 2023. During Kinderhook’s ownership of Trilogy, the provider completed nine add-on acquisitions and expanded its footprint to 11 offices.

“These investments, combined with a premier management team, created the largest independent home health provider in Florida,” Louis Aurelio, managing director at Kinderhook, said in a statement at the time of the sale.

With an initial investment on a much larger scale – Enhabit has 249 home health locations, not to mention its 117 hospice locations – I expect Kinderhook’s push for scale will be pretty aggressive, although Michalik emphasized that the acquisition strategy will remain “thoughtful.”

While charting a future in which Enhabit pursues growth with new gusto, I do have to keep in mind that Jacobsmeyer zeroed in on operational and strategic stability in her answers to me.

With a new owner and a CEO transition coming, this might seem like a moment to embrace transformation more than stability. But Widmar suggested to me that Jacobsmeyer’s stepdown and the sale to Kinderhook are likely a coordinated effort and a “natural evolution of the organization” – meaning that the company has had plenty of time to plot its course and leadership succession, making the stability that Jacobsmeyer emphasized possible despite significant changes.

The very fact that the company’s message is emphasizing “stability” versus “turnaround” is a testament to the progress that Enhabit has made in the last few years. When the strategic review concluded in May 2024, the company’s leadership announced that Enhabit would continue to operate as a standalone business.

“We believe macro headwinds including, among other things, uncertain regulatory developments including Medicare reimbursement policies throughout the health care industry and an evolving antitrust landscape, a difficult health care operating environment, and persistently high interest rates ultimately stifled possibilities for a transaction that would enhance shareholder value,” Leo Higdon, the chairperson of Enhabit’s board, said in a statement.

With regard to Medicare reimbursement, uncertainty still exists, but CMS’ decision to significantly soften 2026 rate cuts may have played an important role in paving the way for this deal. Potential buyers in the home health space likely had been waiting for “greater clarity” on the reimbursement outlook in order to underwrite deals, the Jefferies note stated.

Furthermore, Enhabit is significantly less exposed to Medicare fee-for-service rate risk today than it was in the past, when about 80% of the company’s revenue was tied to fee-for-service. Rebalancing that has involved the transition to making Medicare Advantage a more significant payer. In just one example of how tricky this process was, Enhabit walked away from its relationship with UnitedHealthcare in 2024, after months of negotiations did not lead to what Jacobsmeyer termed “acceptable rates.”

The move earned cheers from other industry leaders, including many who commented on the decision at HHCN’s FUTURE Conference that year.

Ultimately, Enhabit did reach an agreement with UnitedHealth that Jacobsmeyer found acceptable, even though the arrangement was not considered a “payer innovation contract,” as defined by Enhabit. This refers to Enhabit’s push to engage in more favorable MA contracts. While there are several features of the payer innovation strategy, one key goal involved contracts organized around episodic reimbursement and quality-based arrangements versus per-visit rates.

Enhabit has had success with this strategy. As of Q1 2025, 44% of non-Medicare visits were in payer innovation contracts.

As for the other headwinds that Higdon cited in 2023, the interest rate environment has of course changed with the three consecutive rate cuts enacted by the Federal Reserve last year. And the antitrust environment likewise is different now, as evidenced in the home health sector by the consummation of UnitedHealth Group’s acquisition of Amedisys, which had been challenged by the Biden administration’s Department of Justice.

Dealmaking implications

In addition to Kinderhook’s experience with home health, the firm has extensive experience in value-based care, which is likely to be a top priority for the new iteration of Enhabit.

The focus on alternative and value-based reimbursement arrangements is likely to be a key focus for other deals in the space, as well.

“That is indicative of where the broader M&A activity is going, and where the focus of home-based care platforms is going,” Widmar said. “It’s been there for a while … but you’re seeing more and more platforms with scale place bets on value-based care and start to form partnerships that we hadn’t necessarily seen in the past between home-based care organizations and other provider groups, other risk-bearing entities.”

These partnerships work to drive down the total cost of care, but also diversify home-based care providers’ revenue streams, which is an essential move for providers strained by Medicare home health reimbursement.

“These platforms are looking for opportunities to supplement that or fill gaps in EBITDA that they’ve experienced due to reimbursement cuts,” Widmar said.

Taking this deal and Elara Caring’s recent strategic investment into consideration, we can get a pretty good guess at what investors want nowadays. Investors will prioritize companies with sizable footprints, multiple service lines, technology investments and a position to succeed in alternative payment arrangements. These traits will be seen in deals for the next 18 months, Widmar said, as consolidation continues to occur at the local and regional levels.

Enhabit’s dual service lines in home health and hospice also no doubt appealed to Kinderhook. Hospice services continue to “subsidize” home health services, Widmar said – and beyond the attractive reimbursement potential, these services help build a positive patient experience and contain costs.

Finally, the Kinderhook deal may indicate that the M&A landscape – particularly for deals involving large providers – has tilted toward private equity after years of mega-deals being dominated by payers such as United and Humana (NYSE: HUM).

“ … Given current pressures in managed care and heightened regulatory scrutiny around vertical integration, we view a [payer] buyer as unlikely in this case,” the Jefferies analysts wrote.

Indeed, a piece posted today on PE Hub made the case for private equity’s ascendance in this space, citing the Enhabit deal along with recent home health and hospice investments from Renovus Capital; Trive Capital and Coltala; Revelstoke; and Linden Capital.

The market is at an interesting inflection point, which makes me all the more excited for our Capital + Strategy Conference next month. If you’ll forgive me for ending this piece on a promotional note, I encourage anyone interested in further discussing these trends to take advantage of your HHCN+ discount on event registration; just enter the code hhcnplus during checkout to receive 25% off. I hope to see many Plus members in Charlotte!