Current Market Conditions
Q2 of 2020 will go down in the history books as one of the most challenging quarters to be in business for any company, including and especially for home care, home health, and hospice providers. The quarter was marked by good news & bad news, with a hint of hope for the future.
The bad news was that COVID 19 didn’t abate with the onset of warmer weather, thus economic uncertainty remains. With patients & clients refusing care and facilities limiting marketing activities, revenues are down across all segments of the industry (although down a lot less than facility-based operators). However, most observers feel that the “COVID dip” is temporary and there will be a lot of pent up demand once things feel safe again. There’s a new valuation metric reflecting this assumption: EBITDAC! Adding the “C” for COVID to traditional EBITDA indicates that the effects of the pandemic are temporary and should not be held against sellers who are otherwise successful.
The good news is that the crisis has highlighted the importance of in-home care across the board. Not only is in-home care the most comfortable, convenient, and cost-effective type of care, it’s also the safest! As consumers and payers express a strong preference for receiving care at home, growth prospects for the industry seem limitless.
When the economy first started locking down, the M&A market paused as buyers assessed risk associated with this unprecedented situation. After a few months, a new normal has emerged: Providers are operating cautiously and resuming strategic execution – which is to say that buyers are back! In the last month we’ve gotten three transactions under Letter of Intent and heard from strategic and financial buyers who are interested in hospice, Medicare certified home health, private pay home care, and Medicaid waiver/managed care home care. Although buyers are being cautious and very selective, valuations are holding for companies that are thriving under these challenging circumstances.
Feel free to contact us any time: We’re always happy to discuss market conditions, valuations, and the process we undertake to effect a successful transaction.