M&A activity for in-home care providers inches upward in third quarter

The number of mergers and acquisitions among home health, hospice and home care companies climbed 7.3% from the previous quarter, as a strong supply offered more opportunities for buyers, M&A firm Mertz Taggart said Wednesday.

Activity was up 29.4% from the previous year, with 44 transactions recorded during the past three months. The third quarter of 2021 had the second most deals than any quarter in the past three years, trailing only the fourth quarter of 2020, Mertz Taggart said in a report.

Major deals in the third quarter included Amedisys' July purchase of Visiting Nurse Associations' home health and hospital operations and LHC Group's acquisition of 23 home health locations, 11 hospice agencies and 13 therapy businesses from Brookdale Senior Living and HCA Healthcare.

"All three sub-industries remain strong, but the increased activity has little to do with increased demand," Mertz Taggart managing partner Cory Mertz said in a news release. "Demand has been strong for several quarters and continues. This is a supply-driven market."

The firm attributes the higher volume to sellers trying to unload properties before potential capital gains tax increases next year. The Biden administration has proposed increasing the tax rate on long-term capital gains to 43.4% from 23.8%.

"The Biden administration came out of the gate with some pretty draconian targets," Mertz said. "The current Build Back Better reconciliation package is still in negotiations, but it appears to be much less severe than the original targets."

The COVID-19 pandemic also could be encouraging sales, the company said.

"We've heard from many owners who are feeling a sense of burnout," Mertz said. "Maybe they were already thinking about a sale in the next couple of years, but then the ongoing pandemic just accelerated their timelines."

Among other things, the pandemic has exacerbated existing workforce challenges in home health, hospice and home care, resulting in operational difficulties for owners. A recent study by consulting firm PHI and the Health Workforce Research Center on Long-Term Care at the University of California San Francisco found that "an immeasurably small number of workers" who were laid off from roles comparable to direct care entered the direct care workforce.