After a slow start in the first quarter, mergers and acquisitions took off in the second quarter for the home care, home health and hospice industries.
M&A research firm Mertz Taggart said the sectors saw 37 transactions in the quarter ending June 30, the second highest quarter on record. Only the fourth quarter of 2020 saw more deals with a total of 53.
“M&A activity ticked back up in a major way in the last quarter, as was expected,” Mertz Taggart Managing Partner Cory Mertz said. “Unfortunately, a lot of agency owners are burned out and thus looking to sell. The pandemic has undoubtedly taken its toll.”
Mertz said as care moved to the home during the pandemic, the value of in-home care increased significantly. He also said proposed legislation that would increase the tax rate on long-term capital gains from 23.8% to 43.4% may also have prompted companies to ink deals before the law is expected to take effect next year.
Private equity buyers accounted for the largest share of transactions, accounting for 24 out of the 37 deals. The home care sector scored the largest number of deals, followed by home healthcare and hospice.
As the U.S. began emerging from the worst of the pandemic in the spring, large home care and home health companies, including LHC Group and Amedisys, said publicly they were on the hunt for acquisitions. Both companies announced acquisitions across all segments and have even announced deals in the hospital-at-home sector.
With a total of 59 deals so far, the industry has some catching up to do if it wants to best the record set in 2020 with 143 total deals. But Mertz thinks the tailwinds that drove the second quarter will continue for the remainder of the year.
“I expect we’re going to see this kind of velocity and perhaps acceleration as we close out 2021, barring anything unforeseen,” Mertz said. “This is setting up to be another record year for the sector.”